Hooray! You got accepted to the college of your dreams. Now comes the next challenge — figuring out how to pay for it. Hopefully, you've been awarded scholarships, grants, or other forms of aid to help you cover most of the cost of your tuition and other expenses. But there are situations where even the best financial aid package will not fully cover the cost of your education. Private student loans can help to fill that gap, making college attainable for many students.
So what is a private student loan and how can you be approved for one? A private student loan is exactly what it sounds like: money that you can borrow from a bank or other lender, used for qualified higher education expenses, such as tuition, room and board or other fees and expenses such as buying a computer or textbooks. Because these loans are offered by private companies, rather than the federal government, they are offered based on the applicant's creditworthiness. In other words, to qualify for a private student loan, you will either need to have a strong credit score, or have a friend or family member who is willing to cosign your loan.
A cosigner is a person who essentially guarantees your loan. You will retain the primary responsibility for the loan, but if you default on the loan, then the lender will turn to the co-signer to pay off your debt. In most cases a cosigner is a family member, such as a parent or a grandparent. Most private student loan companies will not allow students to take out a student loan without a cosigner unless they are over the age of 25 or they have a high credit score (a minimum of 650).
Many students enter college directly after high school, often before they've had the opportunity to build up any credit at all — let alone a high credit score. This can make it challenging for the average borrower to obtain a private student loan without a cosigner. However, it is not impossible. It just takes some advance planning, financial responsibility and dedication.
You can start to build a credit score while you are still in high school in a number of ways, such as getting a credit card in your own name if you are 18, or by asking your parents to make you an authorized user on their credit card if you are under 18. Pay off the balance in full each month, and only charge what you can afford. You could also take out a loan for something like a car, potentially with your parents as cosigners, and make regular monthly payments, or have a cell phone or other bill in your name. The key is to always make your payments on time and in full. This will help build a strong credit score so you will ultimately be able to take out a private student loan without a cosigner.
Being approved for a private student loan without a cosigner can be difficult if you are under the age of 25, but it is possible. By staying disciplined and focused on your financial goals, you will increase your chances of being approved for a loan.