How to Get a Student Loan Without a Cosigner
Borrowing money is never easy, and it’s especially hard for students to get approved. Students are generally busy with schoolwork, leaving little time to earn the income that lenders are looking for. Students also tend to be young, without much, if any, credit history. As a result, most private lenders will only offer a loan with a cosigner involved — and sometimes there's nobody available to cosign.
It is certainly possible to get loans without a cosigner, but it’s not always easy (especially if you want private student loans).
The One Sure Thing: Federal Student Loans
The U.S. government offers several loan programs, some of which do not require an established credit history (so you would not need a cosigner to get approved). It’s best to start borrowing with federal student loans for several reasons.
- Federal loans are available without any credit check or income requirements.
- Interest rates are relatively low and may be fixed for the life of your loan.
- Interest costs might be subsidized (or paid by somebody else) while you’re in school.
- You may be able to use flexible repayment programs like income-based repayment after graduation.
For example, Direct Subsidized and Direct Unsubsidized loans (also known as Stafford Loans) are easy to qualify for regardless of your ability to pay. But you’ll have to repay those loans someday, so borrow only as much as you need.
Perkins loans are another option, but those loans are reserved for borrowers with the greatest financial need, and 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: You can’t borrow as much as you want. Government loan programs come with limits (a maximum amount you can borrow each term), and once you’ve reached the limit you need to seek other sources of funding.
If you need more than you can get from federal loans, you can then move on to private lenders.
Private Student Loans
Private lenders include banks, online lenders, and other companies or organizations that provide funding to students. Those lenders do not benefit from a government guarantee, so they make lending decisions based on your ability to repay: your credit history and income, for the most part.
Getting a private student loan without a cosigner is difficult. However, if you’re among the few students who have a consistent income and established credit history, you’re fortunate — most of your peers don’t have either of those. You may be able to apply and get approved.
If you don’t have strong income and credit, borrowing on your own is most likely going to be difficult and expensive. Unfortunately, you won’t have an easy road ahead. Advertisements may promise easy approval, but they’re likely dead ends at best — and scams at worst. The sooner you know this, the better.
If you’ve got some credit established you can always try to apply for a loan without a cosigner. But without a strong borrower profile, lenders are likely to turn you away. While it doesn’t hurt to ask once or twice, your credit scores can get dinged up if you repeatedly apply for loans.
Build Your Credit
Building credit is not a quick solution, but it may eventually allow you to qualify for loans on your own. Plan for the process to take two years or more, and be aware that you won’t have the world’s highest credit score after that time. However, if it’s the only option you’ve got and you’re willing to wait, then it’s a good option.
Build up your credit history by 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, which will certainly help you establish credit.
Use a Cosigner
Yes, it sounds crazy if your goal was to borrow without a cosigner. But that might not be feasible, or it might be several years before you can pull it off — and even then you might not have the credit scores you need.
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 them decide.
Your involvement with the cosigner might be shorter than you’d expect. With some student loans, cosigners are temporary — they can be removed from the loan after you successfully make payments for a few years. That feature allows you to move on independently, and it allows your cosigner to step away from the risk of repaying your loan.
The things you own may be your key to loan, although you technically aren’t getting a “student loan.” If you own a car, for example, you can pledge the vehicle as collateral for a loan. You probably won’t get enough to fund an entire education, but it may help you get a few classes under your belt while you build credit.
Collateral loans are generally expensive and risky, but they’re an option if that's what it takes to graduate. If you go that route, borrow from mainstream institutions like banks or credit unions that offer a multi-year repayment period (and be sure you can pay off the debt early if possible).
Alternatives to Borrowing
It’s always best to borrow as little as possible, and the inability to use a cosigner may force you to get especially creative. Although that’s a short-term hardship, it may benefit you when you have less student debt than your peers in the future. There may be other ways to fund your education without taking on debt:
- Grants and scholarships proved free money that does not need to be repaid. However, you typically need to apply, 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 that you might not have, but the income is helpful. Some schools offer work-study jobs, and colleges always have businesses nearby that may be hiring part-time workers.
- Less-expensive institutions may be the best option if funds are tight. If necessary, you may be able to transfer to another school after getting started — but research whether or not any credits will be counted toward your final degree.
- Employer tuition may be available from companies in your area. Although it might not be the work you’re looking for, if you add the benefits of education to your compensation package, those jobs start to look better.