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How to Take Out Student Loans Without a Cosigner
In some situations, students have to pay for school on their own. Either their parents’ credit isn’t good enough to cosign a private student loan or the extensive cost of tuition is just too high to pay out of pocket. In any case, it’s important to know how to get student loans without a cosigner — either through the federal government or through the best private student lenders. If you’re applying for a student loan without a cosigner because of bad credit or no credit, remember: you have options.
Federal Student Loans Without a Cosigner
If you want to apply for federal student loans without a cosigner, you have a few options:
- Direct subsidized loans: These loans come from the U.S. Department of Education and are available to undergraduate students with financial need. How much you can borrow is determined by your school. These are pretty much the best student loans you can get, because the government pays the interest on them while you’re in college (as long as you’re taking at least a half load of classes each semester) and for the first six months after you graduate.
- Direct unsubsidized loans: Undergraduate and graduate students can get one of these loans. In this case, the federal government won’t pay your interest, so it will accrue while you’re in school. But direct unsubsidized loans do come with some benefits and protections, including options for income-driven repayment, loan forgiveness and forbearance.
- Direct PLUS Loans: PLUS loans are an option for the parents of students pursuing undergraduate, graduate and professional degrees. Why are we mentioning them? Mostly, just so you know what options are out there. Once again, the Department of Education is the lender, and your parents will need good credit to qualify. However, if they don’t, they may still have some options for getting the loan — like obtaining their own co-signer and completing credit counseling.
[ Next: FAFSA Deadlines, Explained ]
Private Student Loans Without a Cosigner
There are a lot of private student loan options for you here, and too many to spell them all out, but here are a couple of lenders you may want to consider.
[ Read: Is a Personal Loan My Best Option?]
Pros and cons of using a student loan cosigner
Asking somebody to cosign your student loan has its advantages. Having parents or a guardian cosign your student loans makes it far easier to access financial aid, and if the cosigner has good credit, you’d likely benefit from a lower interest rate than you could get on your own.
But there are disadvantages, too, mostly for the cosigner. If you don’t pay those student loans, your parent or guardian is on the hook, and your relationship could suffer if you can’t pay off your loans. Even if things do turn out well in the end, you could end up feeling guilty that you had to draw your cosigner into your financial drama. This all depends, of course, on your relationship with your cosigner — it may be that cosigning a student loan won’t weaken your bond at all.
How to take out student loans without a cosigner
OK, so we gave you some suggestions several paragraphs ago, but let’s drill deeper. Here’s how to take out student loans:
Step 1. Apply for every scholarship and grant you can find
That’s because it’s free money, and obviously you want to first see how much free money you can get before you start putting yourself in debt. The dream, of course, is to be given enough money that you don’t have to take out any student loans. A more realistic hope is that you’ll at least find some scholarships and grants that will reduce what you’ll have to borrow.
Kendra Feigert, director of financial aid at Lebanon Valley College in Annville, Pennsylvania., suggests that high school students check with their guidance office for local scholarships, but also devote some time to national scholarship searches. She says there are a lot of websites that allow you to search for grants and scholarships, including Fastweb.com, CollegeBoard.com and ScholarshipExperts.com.
Step 2. Apply for federal student loans
Loans offered by the federal government generally don’t require a cosigner, whereas private student loans usually do — assuming you’re a high school student without a full-time job and little or no credit history to speak of.
That’s another perk of applying for federal student loans – you don’t need to have a credit history (except with PLUS loans). You’ll also typically get lower interest rates than on private student loans, and you’ll find that federal loans offer more flexibility when it comes time to pay them back with income-driven repayment plans.
You might even be able to get your federal student loans forgiven. This is rare, but if you’re a teacher in a low-income school, for instance, or you devote a decade to working in public service, you may be eligible to have your loan balance forgiven.
Anyway, you’re probably sensing an emerging theme here: Federal student loans are easier to qualify for without a cosigner, and financially easier to pay back than private loans. You’ll want to try that route first.
Step 3. Get acquainted with the FAFSA
If you’ve been looking into financial aid for, say, at least five minutes, you’ve already heard of the Free Application for Federal Student Aid — or just simply called FAFSA. But in case you’re at the beginning of your research, here’s the lowdown: The FAFSA is an online form that you fill out, which will determine how much financial aid you’re eligible to receive from the federal government. Everyone who wants a federal student loan fills out the FAFSA.
And not to worry. The U.S. Department of Education’s office of Federal Student Aid offers more than $120 billion every year in loans, as well as grants and work-study funds. Most students are eligible to get something.
[ See: The Complete Guide to the FAFSA ]
“There’s a misconception that large student debt is linked to federal financial aid programs,” he says. “In fact, the federal government goes to great lengths to be sure that debt is not overwhelming for student borrowers. Students eligible for the very maximum in undergraduate Federal Direct Stafford Student Loan will complete their undergraduate years with a student debt of $37,000. The great majority of students complete their undergraduate years with a total federal debt of $27,000.”
So why do so many people get stuck paying student loans until their retirement years? Well, plenty of students take out federal loans in addition to numerous private loans. And obviously your ability to pay off your student loans efficiently and relatively quickly often depends on what your career post-college is – and how quickly it takes you to find a career that’s well paying. Most new graduates don’t leave college making six figures (or deep into the five figures), and it’s always more lucrative to, say, own the restaurant than flipping burgers for the guy who owns the restaurant.
Step 4. Apply for a private student loan without a cosigner
This won’t be easy without a cosigner — especially if you’re a high school junior or senior. Still, if this is a road you need to take — getting a private student loan without a cosigner — then you’ll want to start establishing your credit history.
The best way to do that is with a credit card. Some student credit cards are specifically geared toward young people trying to build their credit profile, so people with bad credit. But the Credit Card Act of 2009 made it hard to get a credit card without steady income. Some people have griped about that rule; but, it does make it harder to apply for a credit card on your own if you’re a high school or college student.
Anyway, if you do get a credit card with a parent or guardian as your cosigner (or if they add you to their card as an authorized user), from there, you’ll want to occasionally check your credit report and credit score to track your progress.
You can get a free copy of your credit report once a year from AnnualCreditReport.com. There are three main credit bureaus — Experian, TransUnion and Equifax — so if you ask for your annual report from each of them at four-month intervals, you can get a version of your credit report three times a year.
But, again, hopefully you can find enough money for college without getting a private student loan. As noted, it can be more challenging to work with a private lender if you’re struggling to pay off a loan — you won’t find any alternative repayment plans or loan forgiveness. And generally, private student loans are more expensive than federal loans and harder to get without a cosigner.
That said, we don’t want to make it sound like you should avoid private student loans as if it’s malware. They can definitely get the job done when it comes to borrowing money for school.
So if you want to get a student loan without a cosigner, try the federal student loan route first, and the private student loan trail second. And take heart: As you do all of this extensive research into student loans and financial aid, it’s probably very good practice for all of the research you’ll do when you finally get to college.