Getting an education these days costs about as much as buying a Bentley. If you’re not Beyonce-rich (a category all it’s own), then you will probably need student loans. You might even need more loans than the federal student loans the government will give to you. That means you’ll have to turn to private student loans.
While the government is comfortable giving money to teenagers without a co-signer, banks are businesses. Most college students don’t have a credit history so they have no clue how responsible you are. About nine of ten students who use private student loans will do so with the help of a cosigner.
While you might have the budget skills of a financial genius and the earnestness of Jimmy Fallon, there’s no way for a bank to know that. To limit their risk, banks require a co-signer. Even if they don’t require a co-signer, they will often give you a lower interest rate if you have one.
A cosigner is any creditworthy adult who is willing to accept responsibility for the loan should the primary borrower (the student) fail to pay. Most often, parents act as the cosigner. However, cosigning comes with many risks for parents. Studies has shown that cosigning can negatively impact a parents credit and make it harder to save for retirement. So... before you use a cosigned loan, you should look for alternatives!
You, my friend, should be looking for student loans without cosigners. While some might say they’re as real as unicorns, I’m happy to tell you that they do actually exist. They are just rare and hard to come by.
Federal Student Loans (they’re all without a cosigner!)
Federal Loans are the best student loans without cosigners. The problem is that you’re limited to how much money you get from them. The good thing is that the interest rates are fixed and you’re pretty much guaranteed to qualify for some federal student loans. You’re better off to keep your debt manageable, so try to stay within the amount you get from federal student loans.
Different Types of Federal Student Loans
Stafford loans are offered through a federal government program designed to help students finance their higher education. The loans are made directly from the U.S. Department of Education to students through the Federal Direct Student Loan Program (FDSLP).
Stafford loans typically offer lower interest rates than private loans, but there are limits on how much can be borrowed under these loans. These limits are based on whether a student is independent or dependent, and where they are in school. The maximum Stafford loans that can be taken out by a dependent freshman is $5,500, for example, while the maximum amount that can be borrowed by an independent freshman is $10,500. The loan amount increases each year to a maximum of $7,500 for dependent students and $12,500 for independent students. For graduate students, Stafford loans are limited to $20,500 for graduate or professional school and $40,500 for medical school. These loans also have maximum lifetime limits, ranging from $31,000 for a dependent undergraduate student to $224,000 for a medical school student.
To be eligible for a Stafford loan, a student must complete a Free Application for Federal Student Aid (FASFA). The Department of Education will then determine eligibility for loans based on a student’s financial need. Once the loan is signed, a student is not required to make payments while enrolled at least half-time in an accredited institution. The loans are deferred for six months after graduation, withdrawal or otherwise leaving school.
There are two types of Stafford loans: subsidized and unsubsidized. Subsidized loans are granted based on financial need, based on a student’s expected family contribution. Interest is paid by the federal government while the student is in school or in the six month deferral period. For unsubsidized loans, the student is responsible for all interest that accrues while enrolled; the interest that can be deferred while the student is in school, but then it will be added to the loan capital after graduation. Subsidized loans are only available for undergraduate students, while unsubsidized Stafford loans are available to both undergrad and graduate students.
Stafford loans do not have a set interest rate; instead they vary based on the date that the loan was disbursed and the type of loan it is (for an undergraduate or graduate student). All students receive the same interest rate regardless of their credit score or potential for repayment. Under a 2013 bill, the interest rate for Stafford Loans will change each year depending on the current market, but will be fixed for the life of the loan.
Like subsidized Stafford loans, Perkins loans are available based on need. They have a ten year repayment period with a fixed 5 percent interest rate. These loans are also subsidized so that students are not required to pay interest on the loans until after the graduate, go below half-time status, or withdraw from school. The deferment period for Perkins loans is longer than for Stafford loans, with students not required to pay back their loans for 9 months after they leave school.
Students must apply for these low-interest loans through FASFA. They are available to undergraduate, graduate and professional school students with demonstrated financial need. The loans are issued directly through the college or university, which means that only students who attend schools that participate in the Perkins loan program are eligible for these loans.
Perkins loans have limits on the amount that can be borrowed per year and in a lifetime. These limits are based on a number of factors, such as financial need, the amount of other aid that you receive and the availability of scholarships and grants at your institute of higher education. For undergraduate students, the maximum amount that can be borrowed through Perkins loan is $5,500 a year, or a total of $27,500. For graduate students, the maximum amount that can be borrowed is $8,000 per year. Between undergraduate and graduate school, students can borrow a maximum of $60,000.
As with some other federal student loans, Perkins loans may be eligible for loan cancellation policies for graduates who work in public service fields. This may include teaching, law enforcement, government attorneys, active duty military and librarians. However, eligibility for these programs often depends on the setting in which a graduate works; a teacher may participate in the program only by working at certain schools designated by the government.
PLUS loans are offered to graduate and professional students and parents of undergraduate students through the Department of Education. They are not dependent on your financial need, but you must have a good credit score to be eligible for these loans.
There are two types of PLUS loans: Direct PLUS loans for students and PLUS loans for parents. Direct PLUS loans are only offered to graduate and professional students who are enrolled at least half-time at an eligible graduate or professional school program. PLUS loans for parents are available to parents of dependent undergraduate students who are enrolled at least half-time in an eligible program. The name PLUS loans comes from the acronym Parent Loan for Undergraduate Students; this no longer applies as the loans are available for students as well.
There are no limits on PLUS loans, with students and parents able to borrow the entire cost of attending school (tuition plus living expenses) minus other financial aid. The interest rate is higher for PLUS loans than for other federal loans, and the unpaid interest is added to the principal of the loan while the loan repayment is deferred. These loans have an origination fee. PLUS loans are not eligible for student loan forgiveness or cancellation programs.
Unlike Perkins and Stafford loans, a PLUS loan requires a credit check. If you have an “adverse credit history,” you may not be approved for a PLUS loan without a co-signer or unless you can document extenuating circumstances that led to the poor credit history. Students and parents can apply for PLUS loans through FASFA.
Federal Student Loan Pros
Federal student loans have many advantages over private loans for school. They make paying for school easier and cheaper than private loans, and in some case, may even result in your debt being forgiven or cancelled.
For students, one of the most important advantages of federal student loans is that you can get one without a credit history or a co-signer. Most students apply for student loans and aid while they are still in high school — and in many cases, before they even turn 18. This means that they are unlikely to have a credit history, which makes obtaining private loans very difficult. Federal student loans can be obtained without a credit history just by filling out the FASFA — and you don’t need a co-signer for a federal student loan. That is because these loans are not based on your credit (other than PLUS loans for graduate students), so co-signers are not necessary.
After being approved for a federal student loan, repaying loans is often less expensive and easier with federal loans than with private. Interest rates tend to be far lower — and are often half as much as private loans. This is particularly true if you have a limited or bad credit score, which can make private loan interest rates incredibly high. Loan rates are also fixed, so that the interest rate will stay the same throughout your loan; in contrast, many private loans have variable interest rates, which can mean that you end up paying a lot more over the life of a loan than with a low fixed interest rate. If your loan is subsidized, then you won’t have to pay interest on your loans while you’re still in school and for a grace period after you are out of school; this prevents interest from accumulating and increasing your total debt burden while you’re still working on your degree.
Federal student loans also offer better repayment options, with seven different payment plans. This includes income-based repayment plans that allow you to put a maximum of 10 percent of your monthly income towards loan repayment; after a set period of time (20 to 25 years, depending on if the loan is for graduate or undergraduate schooling), your loan will be forgiven. In addition, your loans could be cancelled or forgiven through the Public Service Loan Forgiveness Program if you work in the public sector (for a nonprofit or the government). Private loans do not offer the option of loan forgiveness. You also have the option of putting off your federal student loans for up to three years if you cannot afford to repay them. This can be achieved through deferment for up to three years due to economic hardship, or forbearance for up to one year. Private student loan lenders may offer some options for reducing student loan payments, such as a slightly lower interest rate or permitting you to only pay back interest, but this depends on the individual lender.
If you are having trouble paying off your federal student loans despite generous repayment options, the government gives you a longer period of time before deeming the loans to be in default. After 3 months of non-payment, federal student loans are considered delinquent; they are not considered in default until you have missed nine months of payments. In contrast, private lenders may consider you to be in default the day after you miss a payment.
Another advantage of federal student loans is that if you die or become permanently disabled, your loans will be discharged — but this is not true of private student loans. Lenders may require your co-signer (if any) to repay your student loans if you die, and if your co-signer dies, the company may demand that you repay the entire amount of the loan. Federal student loans will be cancelled if you die, and any PLUS loans taken out for you by your parents will be discharged if your parent dies.
These are the primary reasons why federal student loans are often better for student borrowers than any other loan option. While the best course of action is to avoid borrowing money at all, taking on federal student loans is usually better than private loans.
Federal Student Loan Cons
While federal student loans are generally preferable to private student loans, they do have some disadvantages. Each of these cons should be considered before agreeing to sign a Stafford, Perkins or PLUS loan.
There are limits on federal student loans — which means that even if you qualify for subsidized loans, they will not likely come close to covering the whole cost of your education. You also must meet eligibility requirements and apply through the FASFA program. If you have a criminal record or commit a crime while receiving federal student loans, this may impact or limit your ability to obtain these loans.
If you are unable to pay back a federal student loan, the government has wide-reaching authority to get its money through garnishing your wages or even your taxes. Private student loan companies cannot do the same thing. In addition, federal student loans cannot be discharged in bankruptcy, so unless you die or become permanently disabled, you will not be able to discharge them if you cannot repay your loans.
Overall, federal student loans are a better deal for students — but these factors should be reviewed before signing a loan.
Private Student Loans Without a Cosigner
But what happens if your parents have bad credit and don’t qualify as co-signers, or if you don’t want them to jeopardize their credit or put their house up as collateral? Private student loans without cosigners are not going to be nearly as good as what you would qualify for with a cosigner who has good credit.
First, you will most likely be charged a high originator fee. Second, the interest rate you’ll pay will be much higher. Finally, you might not be able to get one depending on what you’re studying.
So, where can you find these student loan almost-unicorns? Here are some places to check out:
- Funding University: No co-signer required. Funding University offers ultra competitive interest rates, easy-to-understand terms, budgeting tools and job-networking resources – AND, they don't require a co-signer.
- Citizens Bank: While they do technically provide student loans without cosigners, they strongly suggest that you apply with a cosigner.
- Sallie Mae: Under special circumstances Sallie Mae provides student loans without cosigners. They also have a cosigner release program that you can apply for after 12 consecutive payments but they have far more rigid conditions to qualify such as making the student pass a credit review.
What Are Private Student Loans?
Private student loans are any loan that are not backed by the federal government. They can be issued by banks, credit unions or other lenders. As a general rule, these loans require a credit check and may be based on a number of factors, including your choice of school, what you plan to study and whether or not you have a co-signer.
Because private student loans are not offered by the government, they do not have the same advantages as federal student loans. The repayment terms are less flexible, and interest rates are often higher and variable.
What Are the Best Private Student Loan Lenders Who Don't Require a Cosigner?
The best private student loan lenders will depend on your specific situation. To get the best deal, you should start by shopping around. Some sites will permit you to compare rates and deals from a number of different lenders, giving you an idea of what rates you’ll be eligible for based on your credit history.
However, you should look beyond rates to determine the true cost of a loan. The terms of the loan should be carefully considered. This includes any fees, grace periods, rate reductions for on-time payments, and repayment plans. Origination fees can add up to a significant amount of money, which is why it is so critical to carefully look at this item before agreeing to a loan.
Currently, some of the better student loans options from private lenders have been found through Common Bond, iHelp, College Ave, Citizens Bank, and RISLA.
Who Is Eligible For Private Student Loans Without a Cosigner?
Eligibility for private student loans depends on a wide range of factors. Typically, you must be a United States citizen or permanent resident, and be enrolled at least half-time at an institute of higher education. You must also be at least 18 years old.
Beyond these basic requirements, most student loans are determined by a combination of your credit history, the school you plan to go to, and your chosen field of study. The lender wants to know if you are a good risk: will you be able to repay the loan? A demonstrated history of making payments on bills or loans helps to show that you’re a good credit risk. If you are going to an accredited school and majoring in a subject that will likely lead to gainful employment, those are further signs that you will be able to repay your loans.
However, if you do not meet these requirements, you may need to have a co-signer in order to be eligible for a private student loan.
What Is A Cosigner?
A cosigner is somebody who is willing to guarantee that they will pay back your student loans if you are unwilling or unable to do so. Typically, a cosigner is a family member or a close friend with a good credit history who trusts you to repay the loan and wants to help you attend college.
Cosigners are usually necessary if a lender deems you too much of a credit risk to offer you a student loan without one. This happens whenever you have no established credit or bad credit, when you have too little income to or much debt, or if you do not meet the eligibility requirements for a student loan. For example, if you are under the age of 18 or are not a U.S. citizen, a co-signer can help you obtain a loan.
How A Cosigner Helps
A cosigner helps students by allowing them to qualify for a loan that they wouldn’t otherwise be able to obtain. In short, a co-signer will let you borrow money so that you can get a degree that you wouldn’t otherwise be able to get.
A cosigner may be able to help you achieve a lower interest rate as well. If your credit history is non-existent or if you had bad credit, you will likely have a high interest rate for student loans. However, with the help of a co-signer, you will be able to not only qualify for a loan, but get a much more favorable interest rate (provider that your co-signer has a good credit history).
Over time, a cosigned loan can also benefit you by helping you to build credit. If you make regular, on-time payments, you can establish a good credit score — or repair one that has been damaged by financial mistakes in the past.
Pros of Private Student Loans Without a Cosigner
The biggest advantage of a private student loan is that you will be able to pay for your education — almost without limits. If you qualify for a student loan, you will be on your way to earning a degree — and to a whole new life.
There are no caps on private student loans, unlike the limits on federal student loans. You can take out as much as a lender will give you — which can be dangerous if you end up borrowing too much and if you are not putting these loans towards educational expenses. Just be sure that you only take out as much as you need, and use them appropriately.
Unlike federal student loans, private loans may give you the ability to put the money towards different educational needs. The flexibility of private student loans is a major advantage, because it can help you afford anything from a computer for classes to travel to and from school.
In some cases, private student loans may also be cheaper than federal student loans, depending on the interest rate. Some private loans offer lower interest rates than federal loans — but be careful, because these rates are often variable, and can end up costing you more money over the long term if they shoot up unexpectedly.
Cons of Private Student Loans Without a Cosigner
While private student loans can be incredibly helpful, they also come with many disadvantages. These cons can make it harder to pay off your student loans — particularly if you’ve amassed a large amount of debt.
The first negative aspect of private student loans is the lack of limits. When you can borrow almost as much as you want for school, there is no incentive to budget or to keep your spending in check. Instead of a basic, utilitarian computer, you may find yourself shopping for top-of-the-line laptops that are better for gaming than writing papers. You may find yourself living a fairly lavish lifestyle despite having no income — which can spell trouble down the road when you graduate with mountains of debt.
Next, while the interest rates may initially be lower than federal student loans, these interest rates are often variable, which means that the low interest rate that convinced you to sign for the loan in year one shot up to an unsustainable amount in year two. Suddenly, your affordable student loan becomes unmanageable, with the interest adding to principal to make your total debt even greater. The interest rate will also be dependent on your credit score, which means that for young borrowers or those with a bad credit history, the rate could be much higher than with federal loans.
There are also fewer and less generous repayment options for private student loans, with no possibility of having your loan forgiven. Depending on the terms of your loan, you may not have the ability to have your loan deferred or put in forbearance — even if you are unemployed or otherwise unable to work. If you miss a payment, you may be deemed to be in default immediately — which can have a very negative impact on your credit score and affect your ability to get a house, insurance, or even a job.
Finally, because private student loans are not subsidized by the government in any way, you may need to start repaying them while you’re still in school — and when you have little to no income. This can be particularly challenging for students, who often cannot afford to pay even a small amount towards interest or principal each month. And if you cannot make these payments, the interest gets added to the principal so that you graduate with even more debt than you thought you were taking out when you signed the loans.
The bottom line is that while private student loans can help you go to school, they should be avoided in favor of grants, scholarships and federal student loans. They tend to be more expensive and more challenging for students to pay off — and can be a heavy burden for both the student and the co-signer if something happens.
How to Get Student Loans Without A Cosigner
If you need to obtain a private student loan and do not have a co-signer, the best way to do so is to start early and build your credit over time. This requires advance planning and dedication. Research your credit score, and understand what it means. Then start small, taking on certain debt and paying it off regularly and on-time. This can help to build you credit and make you eligible for a student loan without a co-signer.
Disadvantages of Student Loans Without a Cosigner
If you do not have a cosigner, the primary disadvantage is that you will have a much higher interest rate — and your loan will be significantly more expensive over time.
On top of this, you are exclusively responsible for your loan, so there is much more of a financial risk as the borrower.
What Happens If You Don't Find Student Loans Without Cosigners or a Cosigner?
If you can’t find a cosigner or a student loan without a cosigner, you should talk to your school’s financial aid office. They might be able to help you with bursaries. If that doesn’t work you should check out my Cheap Colleges Guide for info about schools where you can go to school for free or almost for free. If not, you should start building a credit rating and find another way to pay for school. Look for a work study position or for a part-time job. Cut back on your expenses or take fewer courses.
Find a way to make it work. It’s not the ideal situation, but sometimes life happens and we need to adapt. Someday when you graduate and make it big, you can look back on all the ramen noodles you ate and laugh. While drinking champagne and eating caviar on your yacht. Hopefully, with Beyonce.
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