What’s the easiest way to get approved for a private student loan? Apply with a cosigner.
Why? Because most college students don't have an adequate credit history to qualify on their own. In fact, 92% of private student loans are cosigned (according to figures from the MeasureOne Private Student Loan Report, Dec. 2019).
Let’s discuss what a cosigner is and what their role is in the student loan process.
What is a cosigner?
If you’ve already been rejected for a student loan, it’s wise to consider reapplying with a cosigner.
A cosigner can be a parent, guardian, grandparent, relative, or any adult with an established credit history. In fact, Sallie Mae reports that 30% of applicants for their SmartOption loan apply with cosigners other than a parent.
Cosigners agree to be responsible for the loan if the borrower is unable or unwilling to pay. In the lender’s view, a cosigner is a co-borrower and is fully responsible for the loan if the borrower defaults.
If it sounds serious, that's because it is. That’s why it’s extremely important to ensure that you are only taking out loans that you’ll be able to repay. (Use our free NitroScore tool to help crunch these numbers. Be sure to hit “refine my score” to take into account all of your information.)
Does everyone need a cosigner?
Even if you can get a loan without a cosigner, it may still be a wise move to apply with one. Banks will base interest rates on the higher credit score, which usually comes from the cosigner.
But even if the cosigner has a lower credit score than you do, a loan is still likely to come with a lower interest rate it there’s a cosigner. That’s because the bank will be taking on less risk if there are two borrowers who can potentially repay the loan, instead of just one.
Is the cosigner's credit affected?
If you’re going to ask someone to cosign a student loan, it’s important to know what you’re asking for. The cosigner does take on a certain amount of risk, and their credit score will be impacted even if you pay the loan on time.
The most obvious risk is that if you default on your loans, the cosigner will be on the hook for repayment. That’s why it’s so critical to find a loan that makes sense for both your and your cosigner’s financial situations.
The loan will also show up on the cosigner’s credit report, meaning their credit rating can go down if the loan goes into default. In addition, the cosigned loan could be counted in the cosigner's debt-to-income ratio if they need to apply for a mortgage, personal loan, or other form of credit.
Many lenders allow cosigners to be released from loans after borrowers have established their own credit and have made a certain number of on-time payments. This allows cosigners to be completely relieved of their obligations to repay the loan. However, it's important to check the terms of the cosigner release before you take out the loan.
What are the easiest student loans to get approved for?
Students who have excellent credit or who are applying with qualified cosigners may be eligible for fixed rate private student loans as low as 4.00% APR.
Check out our picks for the best private student loans of 2021. There, you can view eligibility, loan terms, and rates for all of our recommended and highly vetted lenders.