It’s a fact of life: Most college students simply don’t have the credit history to qualify for private student loans on their own. It’s also true that not everyone who needs a cosigner has someone who’s able to fill that role.
If that sounds like you, we’ve got your back. Read on for some ideas you can use to get past this obstacle.
Exhaust all your alternatives
You may feel dejected when you realize you need a cosigner that you don’t have to qualify for a private student loan. But first things first: Make sure you actually need that private loan.
Federal student loans don’t require a co-signer, so make sure you’ve maxed out any federal aid you qualify for. You should also spend time looking for—and applying to—scholarships and grants you may qualify for. Because these kinds of aid don’t have to be repaid, they’re a far better choice than federal or private student loans.
Don’t assume you can’t qualify for scholarships or grants just because you weren’t at the top of your class. Grants and scholarships are available for students who have financial need, who have special skills in the arts or athletics (known as merit aid), and for just about any other reason you can think of. Check out our scholarship hub for tons of searchable options. If you have a niche interest or hobby (pottery, fire safety, flying drones, you name it) or belong to certain groups (ethnicity, religion, community service, etc.) there is a scholarship out there you qualify for—probably several of them.
Even better, the smaller the niche the scholarship benefits, the better your chances are of winning!
Another option that many people overlook and you shouldn’t is talking to your financial aid office to see if they can amend your aid package. We’ve got tons of resources on when/how to appeal your aid package. Check out these samples of different kinds of appeal letters and how to make them work for you.
Finally, it’s worth thinking outside the box for potential cosigners. It’s usually a student’s parents, but it doesn’t have to be. Your cosigner can be a grandparent, aunt, another relative or even a friend. But think carefully before asking an extended family member, friend or mentor to cosign a loan. There are real downsides for cosigners. You don’t want to put someone who truly wants to help you in an awkward position if they can’t agree to cosign.
Cut back on expenses
Reducing your living expenses helps reduce the amount you need to borrow to cover your college costs. That can help you make better use of the resources above and might make you a more attractive borrower in lenders’ eyes.
If your tuition gap—the difference between what college will cost and what you can pay—isn’t that large, you may be able to get by with smaller changes to your finances, such as dropping some subscriptions, not bringing a car to school and taking on an extra roommate.
If you have a significant tuition gap, you might have to consider taking more significant measures, such as living at home or even enrolling in a less expensive college that wasn’t your first choice.
See also: Personal Expenses for College Students
Improve limited or poor credit
There are two reasons a lender would require you to have a cosigner: Either you have a limited credit history or a bad one.
A limited credit history means you haven’t been using credit long enough for lenders to evaluate your creditworthiness. This is true for most students entering college, since in general they’ve only been eligible for credit for a year or two at most. A poor credit history means lenders are concerned because you’ve missed payments in the past or have defaulted on prior loans. This is more likely to apply to older students.
The good news: You can build up a limited credit history or improve a less-than-ideal one. It just takes time. The steps to do either are similar, so if you’re not sure which applies in your case (or think it might be both) the advice is similar. A few steps you can take to be a more attractive borrower are:
- Take out a credit card. You can definitely do damage to your credit with a credit card but as long as you use them wisely and pay them on time (and ideally, in full), credit cards are a great way to build your credit.
- Pay your bills on time. Lenders mostly want to see that you can be trusted to pay what you owe and do it on time. So even your regular bills, like the fees for your monthly streaming services, can help build your credit.
- Ensure your credit report is accurate. Serious mistakes on credit reports happen more often than you might think. It can happen lots of ways: entries for someone with the same name as you can be included in your report, a bank could enter the wrong information regarding your account, or it could reflect identity theft that you don’t even know about yet. At least once a year, get a copy of your credit report. (This is a free, government-authorized source.) Review it for any errors and if you find some, contact the relevant companies immediately to fix it.
- Think creatively. If you don’t want, or can’t get, a credit card, consider getting a small credit line or cash-secured loan from a local bank. You can also ask a parent or other trusted person to make you an authorized user on their account. As long as you pay back what you owe on time, these all count toward building your credit score.
- Get a job. We say that not because we think you’re slacking, but because having a steady source of income makes you a more attractive borrower even though it doesn’t directly impact your credit score. It has the added benefit of making it easier to save money, which means you may have to borrow less in the long term.
Look for alternative funding options
Just be aware these loans come with their own pros and cons so you (and your parents) should evaluate each of them carefully to see how well they’d work for your specific financial circumstances. Remember: Just because you can take out a loan doesn’t mean you should.
Consider a gap year
A well-established tradition in some countries, gap years—a planned year between high school and college to work or pursue other goals—is becoming more common in the U.S.
Taking a year to work can improve your total finances so you have to borrow less and help you build a credit history so you’re more likely to be able to borrow what you need when you do return to school.
Shop around among lenders
Not all lenders use the same formula to evaluate borrowers. Some use different models to rate borrowers and may give more weight to areas besides your credit history. They also have different criteria for when a cosigner is needed. Just because one lender wants you to have a cosigner doesn’t mean all lenders will.
For example, Ascent has an option for college juniors and seniors that doesn’t require a cosigner. And if you opt to use a cosigner, you can easily release them after you’ve made the first 24 consecutive months of principal and interest payments on time.