How to cosign a student loan if you have bad credit: tips and alternatives

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Key takeaways

• You may still be able to cosign¹ a loan even if your credit isn’t perfect. 

• Lenders like Earnest may accept candidates with fair credit and consider applications based on a holistic range of financial characteristics. 

• If you can wait a few months before cosigning, use that time to boost your credit. The higher your credit score, the lower the interest rates you could be eligible for.

• Cosigning any loan comes with risks. Before you agree, make sure the student is someone you trust and that they have a plan to make their payments on time. 

Yes, you may be able to cosign a private student loan with fair or imperfect credit—but you still need to meet the lender’s minimum requirements. Not all lenders use the same criteria, and a qualifying credit score alone does not guarantee approval. 

Cosigning a student loan is one of the most effective ways to help a college student you care about—and you don’t have to have perfect credit to do it. Several modern lenders, including Earnest, evaluate borrowers based on a broad range of financial factors, not just on credit score alone. So, if you can prove your financial savvy in other ways, you could still be approved to cosign. 

These relaxed eligibility requirements make financing more accessible, both for students hoping to apply with cosigners, as well as for parents and guardians looking to help students they’re close to. (We’ll focus on the latter category here. If you’re a student borrower trying to figure out if you need a cosigner, this article is a better place to start.) 

By leveraging your credit, you could help your college student get approved for a loan, potentially save money on interest, and build a more financially secure future. Here’s how to make it happen, even if your score is a little less than stellar. 

Can I cosign a student loan with bad credit?

Possibly—but “imperfect credit” and credit below a lender’s minimum are not the same thing. If your score is below the lender’s required threshold, strengths elsewhere in your application generally will not overcome that minimum. If your score meets the requirement but is only fair, the lender may evaluate the rest of your financial profile before deciding whether to approve the application and what rate to offer.

Earnest does not evaluate a credit score in isolation. For private student loans, Earnest also considers debt load and your ability to manage the proposed payment. Earnest’s published guidance also says private student-loan applicants cannot have past-due balances reported within the previous 365 days.

You can review Earnest’s eligibility requirements and check eligibility before committing to a full application. Eligibility and final approval remain subject to the complete application and underwriting review.

What credit score do I need to cosign a student loan?

Earnest accepts cosigners with fair to excellent credit. But what constitutes fair credit, anyway? Experian, one of the three big national credit bureaus, classifies credit scores using the following categories. 

• 579 and below is considered poor credit

• 580 to 669 is fair

• 670 to 739 is good 

• 740 to 799 is very good

• 800 and up is considered excellent 

Generally, you need a credit score in the “fair” to “good” range to be approved as a cosigner on a student loan. The higher your credit score, the lower interest rates you could be offered. Lower interest rates could translate to a significant amount of money saved² over the life of the loan. 

Most lenders set an absolute minimum credit score they’ll consider. For Earnest (and most others), that minimum is generally 650. If your score is below that, it might be tough to find a private lender who will approve you to cosign. That said, these minimums vary by lender, and some may be willing to accept lower scores. 

The other good news is that credit score isn’t the only factor lenders consider when assessing a potential cosigner. Earnest, for example, also looks at an applicant’s income, employment history, savings, and debt-to-income ratio. 

A higher score may improve the likelihood of qualifying for more favorable terms, but it does not guarantee approval or a lower rate. The student’s application, the cosigner’s full financial profile, the loan amount, and other underwriting factors can affect the result.

What else do lenders look at beyond your credit score?

It’s not all about credit score. Here’s what lenders actually care about when they’re evaluating your application for a cosigned student loan.

• Income: Lenders want to know that the cosigner can cover the loan if the primary borrower falls through. They’ll typically assess that by looking at the cosigner’s annual cash flow. 

• Employment history: Lenders are more likely to trust a cosigner who’s been pulling in a steady income for years, if not decades. You’ll be a stronger candidate if you have a long history of consistent employment. 

• Existing debt: If you’re already spread thin across a bunch of existing debts, lenders might have their doubts about your ability to make payments if the primary borrower fails to do so. A high debt-to-income ratio could disqualify you, even if the rest of your profile looks good. Conversely, a low debt-to-income ratio makes you look much more appealing to a lender. 

• Bankruptcies and collections events: If you’ve recently filed for bankruptcy or you have debt that’s actively in collections, that could be a deal-breaker for lenders—even if your income and job stability are otherwise good. 

• Credit score: Each lender has its own minimum threshold. Earnest requires cosigners to have a score of at least 650.

• Citizenship or residency: Some lenders require cosigners to be U.S. citizens or legal residents, so cosigners who are not may be denied.

How to improve your chances of being approved as a cosigner

Even just a few months of focused effort could be enough to boost your credit. No action guarantees a particular score, approval decision, or interest rate, but generally, a higher score is more likely to be offered more favorable terms. You can start by checking your credit report for free from AnnualCreditReport.com. Once you know where you stand, here are a few things you can do to improve your score.

• Pay down your credit card debt. If you owe money on any revolving credit accounts—like credit card debt or a home equity line of credit—pay that down as much as you can. Ditto for car payments or personal loans if you’re close to paying those off. The lower your debt-to-income ratio, the higher your chances may be of approval for a cosigned loan. 

• Avoid opening new lines of credit. Frequent applications for credit cards or loans can make you look like an irresponsible credit user. If you’re planning to cosign within the next year or two, try to avoid applying for new lines of credit in that time.    

• Dispute any errors on your credit report. Credit reporting errors are more common than you might think, and serious ones can unfairly affect your score. Comb through your report every few months and report any discrepancies to the credit bureau right away. 

• Keep making on-time payments. Your payment history is the biggest single determinant of your credit score. If you have an impeccable record, great—keep it that way. If you have a loan in default, make a payment ASAP and make all other payments on time to rebuild that portion of your credit score. 

• Fix any delinquencies ASAP. If you have a recent history of delinquency, act immediately. Contact your loan servicer and see if you can get on a lender-administered rehabilitation plan to bring your loans current.

• Use a credit-boosting service. Services like Experian Boost and UltraFICO will use recurring payments—like subscription fees—to beef up your payment history. If you’re a pro at paying your rent on time, you might also want to consider a rent-reporting service. Some of these services count previous payments, which can result in an immediate score boost.

• Keep your credit utilization ratio low. If you typically max out your credit cards each month, consider toning it down. Using no more than 30% of your total available credit limit makes you look like a more responsible credit user—which will translate to a higher credit score.

Do DACA students require a cosigner?

Most private lenders require a U.S.-based cosigner before they approve a loan for students with DACA status. At Earnest, we understand that DACA students may find themselves in circumstances that make it difficult to secure an eligible cosigner. That’s why we make it possible for students with DACA status to apply for Earnest student loans with or without a cosigner.

Alternatives to cosigning a student loan with bad credit

If your credit score isn’t currently high enough to qualify as a cosigner, don’t panic—there are still student loan options available to you and the borrower you’re supporting.

Appeal your financial aid package

A financial aid appeal is a formal request submitted to a college or university’s financial aid office to review and potentially adjust the student’s financial aid package.

Typically, it’s initiated by the student or their family when there are significant changes in the family’s financial situation, like a job loss, medical expenses, or other unforeseen circumstances that may impact their ability to afford the cost of attendance.

A financial aid appeal allows students to present additional information or documentation that wasn’t originally considered when the financial aid package was determined. This could include details about changes in income, family status, or exceptional expenses that can affect the family’s ability to contribute to the student’s education.

To initiate an appeal, the student typically needs to submit a formal letter explaining the reasons for the appeal and providing supporting documentation, such as tax returns, medical bills, or other relevant financial records. The college’s financial aid office will then review the appeal and may adjust the student’s financial aid package based on the new information provided.

If you’re considering a financial aid appeal, reach out to your college’s financial aid office to understand their specific requirements and deadlines for submitting an appeal. Their guidance can provide valuable insight into the process and increase the likelihood of a successful appeal.

Borrow federal student loans

Most federal student loans do not require a cosigner. That’s why the first thing the parent or guardian of a student borrower should do, if their child is a U.S. citizen or permanent resident, is to help them fill out the Free Application for Federal Student Aid (FAFSA). This application assesses financial need for current and prospective college students.

The FAFSA uses your tax filing info, household income, assets, and other financial information to determine how much your family should be able to contribute per year for the cost of education, and what kind of institutional aid, federal grants, and loans you may be eligible to receive.

U.S. citizens and permanent residents who wish to study abroad can also receive federal aid to attend foreign institutions. However, international students coming to study in the U.S. are generally not eligible for federal aid.

There are a few different types of federal student loans. Plan to have your student max out their federal Direct Subsidized Loans first. These have the lowest total interest costs. Then, max out Direct Unsubsidized Loans, which are slightly more expensive. Neither Direct Subsidized nor Direct Unsubsidized Loans require a credit check. 

When the student has maxed out those two categories, consider Parent PLUS loans, which can allow you to take out education loans on a student’s behalf—albeit with a credit check and at a higher interest rate.

Supplement with private student loans and plan to refinance

After your student has maxed out the federal loans available to them, they can supplement the rest with private loans. Usually private loans require a cosigner, since most aspiring college students don’t meet the eligibility requirements on their own.

Keep in mind that the riskier the borrower, the less likely the lender will be to offer flexible terms and low rates. So if you don’t meet cosigner eligibility requirements, it’s in the student’s best interest to find a cosigner who does.

If they can’t find an eligible cosigner, and they’ve tried other ways to make college more affordable, they may be forced to accept a high-interest loan to afford their number-one school. If this happens, they should make a plan to refinance³ as soon as they can.

Refinancing is when the student takes out a new loan to pay off their old student loans. If their financial situation has improved since they took out their original loans, they may be able to secure a lower rate, which could save them thousands of dollars over time.

What cosigning means for your own finances

Figuring out whether you’re a good candidate to cosign someone’s loans—and whether it’s a risk you want to take—can be daunting. Here’s what to consider before you start looking at loan applications.

Will cosigning affect my debt-to-income ratio?

When you cosign a student loan, you’ll see it reflected on your credit report as if it’s yours. That’s because the student debt is considered your debt until it’s fully repaid. So, if you’re applying for other types of loans, like a mortgage, the debt will be calculated as part of your debt-to-income ratio come application time. That may make it harder to get approved.

How will cosigning a student loan affect my credit?

Cosigning a student loan won’t just affect your debt-to-income ratio. It could also affect your payment history. If the primary borrower misses a payment, the miss will show up on your credit report as if you were the one who forgot to pay. 

On the other hand, if the borrower does make regular on-time payments, being a cosigner can boost your credit score by padding your own payment history. Cosigning can also improve your “credit mix,” and boost your score by making it look like you can successfully juggle several different types of debt at once.

Can I be released as a cosigner on a student loan?

Generally, getting released as a cosigner on a student loan happens one of two ways:

• The cosigner release: A cosigner release is a legal provision built into a student loan that allows the cosigner to be released from the loan after certain conditions are met. Usually, it comes after a certain number of on-time payments are made in full. However, not every lender offers a cosigner release, so it’s important to ask before you sign.

• Student loan refinancing: Student loan refinancing is when the borrower takes out a new private loan to pay off their old loans. In most cases, the primary borrower will choose to refinance once they’re eligible for a loan of their own (once they’ve had time to secure a steady income, establish a good credit history, etc). However, Earnest also lets cosigners use refinancing to take over a loan into their own name. Once the applicant is approved for a refinancing loan, the old loans are paid off, and the entirety of the debt gets transferred to the sole applicant. 

What happens if a borrower misses a payment?

Your main responsibility as a cosigner is to make sure the loan is repaid in full, on time. When you sign the paperwork, you’re essentially saying you trust the student or recent grad who’s applying for a loan—and that you will personally pay off the loan yourself if something gets in the way.

So, if the student borrower starts missing payments, your credit will be impacted if you don’t step in and start paying. It may be wise to discuss automatic payments with the student so that their monthly bills come out of their account automatically and are always on time. As a bonus, many lenders, including Earnest, will offer a small payment discount in the form of a .25% interest rate deduction⁴ as a thank you for signing up for autopay.

How do I know if I should cosign a student loan?

Virtually anyone who is a permanent resident or U.S. citizen, has a good credit score, and meets other eligibility requirements, can apply to be a cosigner. But just because you can cosign for a friend or family member doesn’t necessarily mean you should.

Even if you really trust the student who’s asking you, life happens and people make mistakes. If you can’t afford to take on the payments in an emergency, cosigning could pose a serious financial risk. 

If you’re in a comfortable financial position, you’re not planning on applying for a mortgage anytime soon, and you trust the student who’s asking you for help, it might make sense to say yes. But you should still sit down with them to talk about financial responsibility and how their actions will affect you. 

If the borrower is still in school, you may want to ask them to share a plan for how they’ll maintain a solid GPA so they will graduate on time. It may also be wise to help them make a repayment plan that includes refinancing when they’re out of school. If you’re financially able to do so, you can also help them make interest-only payments while they’re still in school so that the loan amount is more manageable once the grace period is up after graduation.

Frequently asked questions

Can I cosign with a 650 credit score?

Potentially. Earnest currently publishes a minimum cosigner score of at least 650, but meeting the minimum does not guarantee approval or a particular rate. Other eligibility and underwriting criteria apply.

Does checking eligibility affect my credit?

Confirm the process and credit-check language on the lender’s current application page before submitting information. An initial eligibility check may differ from a complete application, which can involve a hard credit inquiry.

Can good income make up for a score below the minimum?

Generally, no. If a lender applies an absolute minimum credit score, income or savings will not necessarily overcome a score below that threshold. If your score meets the minimum, the rest of your financial profile may still affect approval and terms.

Learn more about Earnest student loans

Cosigning a loved one’s student loans could help them afford a higher education, attend the school of their dreams, and/or secure a lower interest rate on their private student loans. All these outcomes are potentially life-changing for a young person.

But before you say yes, make sure you’re in a good position to cosign. Cosigning is a serious decision and can have a lasting impact on your credit. If you’re not in the right spot now, you may be able to work on your financial situation and apply with Earnest at a later time.

If you’ve already confirmed that you qualify and you’re ready to move forward, consider applying for a low-cost student loan⁵ with Earnest. We never charge any fees or prepayment penalties, and we let you select from a wide range of loan terms to find the perfect repayment schedule for your needs.

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

1 Adding a cosigner does not guarantee approval or a lower rate. Loan terms depend on you and your cosigner’s credit profile and other factors. Cosigner impact varies; approval and rates not guaranteed.

2 Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.

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

4 You may receive an interest rate reduction by enrolling in Auto Pay with a checking or savings account. The reduction applies only while enrolled and may not be combined with certain repayment programs. For joint loans, only one borrower may enroll.

5 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, grants, 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 you're 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.gov/.