Finding a cosigner for student loans when your parents can't cosign

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When students need someone to cosign their loans, they usually turn to their parents first. Unfortunately, parents aren’t always in a position to help. If yours aren’t, don’t let that stop you from getting the funding you need. There are plenty of other options out there, and there’s nothing wrong with asking someone else for help to pay for school.

TL;DR – Key takeaways

• A cosigner is someone who agrees to pay back your loan in the event you can’t.

• As a student with little credit history, you may need a cosigner to get approved for a loan and/or access a lender’s lowest rates.

• You don’t have to be related to your cosigner. They can be anyone who is financially stable and a legal US resident.

• When looking for a cosigner, you should seek out someone close to you who has a steady income and a good credit score.

• Before you get someone to cosign a private student loan, make sure you’ve exhausted all other funding options first, like scholarships, financial aid, and federal loans.

What is a cosigner?

A cosigner is a person who agrees to pay your loan if you can’t pay it back. This can be useful for students who don’t have the credit history or income to qualify for a loan on their own.

When applying for a student loan, a cosigner must cosign the application with the borrower. This means that in case of delinquency, both parties are responsible for making payments on the student’s behalf.

The terms of the loan will be based on the cosigner’s credit history, not that of the student. This means that if you have bad credit and your cosigner has excellent credit, it may be easier to get a loan with favorable terms. For borrowers of private student loans¹, some of the best rates are usually offered to those with cosigners.

Who can you ask to cosign your student loan?

As with any financial decision, it’s important to consider many factors before deciding who will cosign your student loan. You’re looking for someone who is financially stable and willing to pay back the loan if you can’t. Your parents may be an obvious choice for this role, but there are other potential candidates that might be more suitable — for example, grandparents or siblings can often be more flexible with their finances than parents.

In the end, anyone in good financial shape who is willing to cosign for you can do so. They don’t have to be related to you, but they do have to be a legal US resident or possess a 10-year (non-conditional) Permanent Resident Card.

That said, just because you can ask anyone doesn’t mean that everyone is well-suited for this kind of responsibility. Whoever cosigns for you will be responsible for the loan if you can’t pay — not just for a few months or years, but potentially for decades. It’s not something that should be taken lightly, or agreed upon by parties that you don’t have a close relationship with.

Avoid online cosigners for your student loan

Online cosigning services advertise opportunities for prospective borrowers to get matched up with a stranger who’s in a position to cosign a loan. While it may sound ideal for both parties at the outset, these services can be quite predatory.

You may be asked to pay an application fee to get matched, and this fee may not be refunded if the service fails to match you. You may have little to no control over whether the person you’re matched with meets the cosigner requirements for the private lender you’re applying with. And they may ask you to take out a larger loan amount and send them some of the money.

Ultimately, you’re likely better off taking a loan with a higher interest rate than taking a huge risk by using a questionable online service to match you with a stranger to whom you’re going to be legally tied until you make your last loan payment.

What to look for in a student loan cosigner

When you’re looking for a cosigner, there are several things that are important to consider.

• The first thing is to make sure that the person has a good credit score (670+). If they have bad credit, it may be difficult for them to qualify for loans on their own and get approved.

• Next, it’s important that this person has steady income and a low debt-to-income ratio (DTI). This means they are able to pay off their debts without having too much trouble if something unexpected occurs, like car problems or an illness in the family. A good DTI is anything below 35%.

• It’s also important that this person is willing to cosign your loan. Though they may be in great shape financially, they need to be sure they’re ready to take on the responsibility of paying back your loan in the event you can’t. This is no small ask, which is why your cosigner should be someone close to you that you can count on.

How to ask someone to be your cosigner for a student loan

Identifying a cosigner isn’t always enough. Sometimes, you’ll have to convince them. Here are some things you should be ready to explain to your cosigner to get them to agree to sign on the dotted line.

• Explain the reasons why you need a cosigner. As a student, it’s likely because you don’t have the credit score or financial stability to qualify for the loan on your own.

• Be honest with your cosigner about your financial situation, and make sure that they understand how much responsibility they’re taking on by cosigning for your loan. They’re going to be responsible for your debt if you can’t pay it, and cosigning may make it harder for them to qualify for other loans. These are both things they need to know before they sign.

• Make a plan to release your cosigner of responsibility as soon as you can (either with a cosigner release or by refinancing your loans)². This can happen when you get more stable employment, save enough money to pay off the loan yourself, or have another family member agree to be responsible for paying back the debt.

• Be prepared to pay back the loan by any means necessary. If you fail to make payments on time and in full each month, that reflects badly on both parties involved. Lenders may refuse future loans because they view you and your cosigner as a risky investment; creditors may come after both parties if they think either one is hiding assets or income from them; and ultimately both parties will suffer from poor credit ratings. You have to be ready to work during school if you need to, apply for other types of aid (like scholarships), or to work multiple jobs after graduation to make regular payments.

Can you get a student loan without a cosigner?

If you can’t find a cosigner, don’t panic. There are many ways to get funding for tuition and the full cost of attendance. Here are some things you can do without a cosigner.

If, after exploring these options, you still have a gap between what you can borrow and what you need to pay, try calling the financial aid office at the college you’re planning to attend. There may be lesser-known grant opportunities available to you, or extra funding in the department where you plan to study that can help cover expenses not related to tuition. It never hurts to ask.

Max out your federal loans

Whether you’re an undergraduate college student or graduate student, the best student loan is usually a federal student loan. While private loans may have lower interest rates for people with excellent credit, federal loans are available to virtually all students who are permanent residents, regardless of credit. They can also provide significant peace of mind thanks to flexible repayment plans.

The first thing you should do if you’re interested in applying for federal student loans is to fill out the FAFSA form, or the Free Application for Federal Student Aid. This form will assess your and your family’s ability to pay for higher education and determine the loan options available to you through the Department of Education.

Federal student loans have a lot of protections for borrowers to prevent them from falling into hardship due to loan payments. If you have a hard time finding a job after university or if you later lose your job and have a low income, you can apply for one of several income-based repayment plans that can reduce your payments down to zero.

These loans fall into three main categories:

• Direct Subsidized and Unsubsidized Loans for undergraduate students: These loans are for undergraduate students and do not require a cosigner. We recommend always checking the Federal Student Aid site for the current rates. Subsidized loans do not accrue interest while the student is enrolled full-time or at least half-time, while unsubsidized loans accrue interest from disbursement.

• Direct Unsubsidized Loans for graduate or professional students: These loans are for continuing education such as a masters degree or PhD. You do not need a cosigner for these loans and can also find the latest rates on the Federal Student Aid site.

• Direct PLUS Loans for parents, graduates, and professional students: Parents and graduate students can take out these loans to cover attendance costs above and beyond tuition and university fees. For example, these loans can be used to cover transportation to and from university; monthly rent and groceries; and personal expenses. U.S. permanent residents and citizens who are international students studying abroad may also use these loans to cover expenses such as student visa fees. These loans do not require a cosigner and you can find their current rates on the Federal Student Aid site. They do, however, require a credit check to make sure the primary borrower has no adverse marks on their credit report.

All primary borrowers seeking federal student loans must go through student loan debt counseling as part of the eligibility requirements for federal loans. This online counseling explains loan repayment terms, highlights the importance of making on-time payments, and will show you how your monthly payments could increase or decrease if you take out more or less money, or change your repayment schedule.

While you’re in school, you can build your credit score so that you can apply to refinance your loans for a lower interest rate after graduation.

Look for lenders who offer no-cosigner student loans

Beyond the federal government, you may be able to find some private lenders who offer student loans without a cosigner¹. Earnest, for example, looks at more than just your credit score when determining whether you’re eligible for a loan. If you have had steady employment or if you have built up your credit history by making on-time credit card payments before applying for a loan, you may be eligible to take out a loan without a cosigner.

You can also contact your local credit union or look for financial aid organizations in your city that may have resources to share with you.

Improve your credit score

If you have some time before applying for loans, take stock of your financial situation and try to improve your credit score. This way, you have a better chance of qualifying for private student loan lenders who may be able to offer a better interest rate than the federal government.

To improve your score, you can try:

• Applying for a credit card and paying it off in full every month

• Using a feature like Experian Boost to manually add utilities and streaming services to your account to give you a few extra points

• Checking your credit report to make sure there are no mistakes impacting your score

• Paying off existing debts and/or increasing your income through a side hustle to improve your debt-to-income ratio

Explore Other Options

If your parents can’t cosign, you’re not out of options. You can go through another family member or guardian (whoever has the best credit), or you can ask a close friend or mentor. As long as they are willing and able to step up for you in the event you can’t make payments, any legal US citizen with good credit can be your cosigner.

Ready to fund your education? Use our free student loan calculator to see how much you could save with Earnest. It takes minutes, and it won’t impact your credit score.

This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

1 Before applying for private student loans, it’s best to maximize your other sources of financial aid first. It’s recommended to use a 3-step approach to assembling the funds you need: 1) Look for funds you don’t have to pay back, like scholarships, grant, and work-study opportunities. 2) Next, fill out a FAFSA(R) form to apply for federal student loans. Federal Direct subsidized and unsubsidized loans, excluding PLUS Loan for Parents and PLUS Loan for Graduate and Professional Students which require a credit check and a credit worthy endorser if the parent or graduate or professional student has adverse credit, do not require a credit check or cosigner, and offer various protections if your struggling with your payments. 3) Finally, consider a private student loan to cover any difference between your total cost of attendance and the amount not covered in steps 1 and 2. For more information, visit the Department of Education website at https://studentaid.ed.gov.

2 You may lose benefits associated with your underlying federal and/or private loans if you refinance such as federal Income-driven Repayment Plans, Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options. If you file for bankruptcy, you may still be required to pay back this loan.