How to Get a Student Loan Without a Cosigner
Look to the government first
Borrowing money is never easy and it can be especially difficult for students to get approved for loans. They're generally busy with schoolwork, leaving them with little time to earn the income that lenders look for. Students also tend to be young and without much—if anything—in the way of credit histories.
Most private lenders will approve loans to students when a cosigner is involved, but sometimes there's just nobody available to cosign. It's possible to get a loan without a cosigner, but it’s not always easy.
The One Sure Thing: Federal Student Loans
The U.S. government offers several loan programs that don't require an established credit history. You would not need a cosigner to get approved.
It’s best to start borrowing with federal student loans for several reasons. They're available without any credit check or income requirements and interest rates are relatively low. Rates might even be fixed for the life of your loan.
Interest costs might be subsidized—paid by somebody else—while you’re still in school. You might be able to use a flexible repayment program like income-based repayment after graduation.
Direct Subsidized and Direct Unsubsidized loans, also known as Stafford Loans, are easy to qualify for regardless of your ability to pay. But you will have to repay those loans someday, so borrow only as much as you need.
Perkins loans are another option, but these are reserved for borrowers with the greatest financial need. There’s no guarantee that you’ll get a Perkins loan.
The Department of Education makes it easy to get money, but there’s a hitch: Government loan programs come with limits, the maximum amount you can borrow for each term at school. You'll have to seek other sources of funding if you reach the limit. You can move on to private lenders if you need more than you can get from federal loans.
Private Student Loans
Private lenders include banks, online lenders, and other companies or organizations that provide funding to students. These lenders don't benefit from a government guarantee so they make lending decisions based on your ability to repay. They'll assess your credit history and income.
Getting a private student loan without a cosigner is difficult, but if you’re among the few students who have a consistent income and an established credit history, you might be able to apply on your own and get approved. Advertisements might promise easy approval but they’re likely dead ends at best and scams at worst.
You can always try to apply for a loan without a cosigner if you have some credit established, but lenders are likely to turn you away if you don't have a strong borrower profile. It doesn’t hurt to ask once or twice, but keep in mind that your credit scores can get dinged up if you repeatedly apply for loans over an extended period of time.
Build Your Credit
Building credit isn't a quick solution and it might not be feasible if you plan to start school in the current year because you'll need some time to accomplish it. But eventually, with a solid credit history, you should be able to qualify for loans on your own.
Plan for the process to take two years or more. You won’t have the world’s highest credit score after that time because one factor that contributes to most scores is how long you've been borrowing. But it should be sufficient.
Begin borrowing responsibly. Even if you can’t borrow enough for school right now, you might be able to get a small loan or a credit card. If you work part-time and can deposit $500 or so at a credit union, ask about a secured credit card or a cash-secured loan. Either one will help you establish credit.
The things you own might be your key to a loan although this technically wouldn't be a “student loan." If you own a car, for example, you can pledge the vehicle as collateral for a personal loan, then you can use the money for tuition, fees, and other costs. You probably won’t get enough to fund your entire education, but it might help you get a few classes under your belt while you work on building your credit.
Collateral loans are generally expensive and risky, but they’re an option if that's what it takes to graduate. If you go this route, borrow from mainstream institutions like banks or credit unions that offer multi-year repayment periods, and make sure you can pay the debt off early if possible.
Use a Cosigner
Yes, it sounds crazy if your goal is to borrow without a cosigner, but that might not be feasible or it might be several years before you can pull it off. If you’ve tried everything else, consider asking somebody to cosign a student loan for you.
Of course, your cosigner must be willing and able to take the risk for you, but the risks might be smaller than you imagine. Ensure that any cosigner understands what’s at stake and let him decide.
Your involvement with the cosigner might be shorter than you’d expect, too. With some student loans, cosigners are temporary—they can be removed from the loan after you successfully make payments for a few years. This feature allows you to move on independently and it allows your cosigner to step away from the risk of having to repay your loan if you can't do it.
Alternatives to Borrowing
The inability to use a cosigner might force you to get creative when it comes to financing your education. There are other ways that don't involve taking on debt.
Grants and scholarships provide free money that doesn't have to be repaid. You have to apply, however, and you never know if your efforts will be rewarded. That said, some programs are quite easy to apply for.
Working during school takes valuable time from your studies, but the income can be helpful. Some schools offer work-study jobs, and colleges always have businesses nearby that might be hiring part-time workers.
Less-expensive institutions could be the best option if funds are tight. If necessary, you might be able to transfer to another school after getting started at a less expensive college, but make sure any credits you earn will be counted toward your final degree.
Employer-paid tuition might also be available from companies in your area. It might not be the work you’re looking for, but those jobs start to look better when you add the benefits of education to your compensation package.