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Student Loans

Do You Need a Cosigner for Student Loans?

Updated Jun 27, 2023   |   4-min read
Aly Yale Author Photo
Written by Aly Yale
Aly Yale Author Photo
Written by Aly Yale

Expertise: Home equity, mortgages, real estate

Aly Yale is a freelance writer with more than a decade of experience covering real estate and personal finance topics.

Learn more about Aly Yale

A cosigner is someone who agrees to sign your student loan contract with you, essentially sharing the responsibility of the loan — and its repayment.

Lenders typically require a cosigner if you have no credit history or a low credit score. By having a creditworthy cosigner, it’s likely to be easier to qualify for a private student loan and get a lower interest rate once approved.

Do you need a cosigner for your student loans? Here’s what you need to know before moving forward.

In this article:

How does a cosigner improve student loan approval odds?

Private student loan approval is based on creditworthiness — not financial need. So with these loans, a lender will consider both your credit score and income history when you apply. This can make it hard for some students to qualify (many don’t yet have a credit score). It can also make getting an affordable interest rate more challenging too.

Fortunately, adding a cosigner to your loan can often help your case — especially if the cosigner has excellent credit and a steady income. When you add a cosigner to your loan application, the lender will check that person’s credit report and income history in addition to yours, increasing your chances of approval and, in some cases, giving you a lower interest rate as well.

Cosigners are pretty standard in the student loan industry, so don’t be afraid to use one on yours if necessary. According to data from MeasureOne, about 88% of all private student loans were cosigned for the 2019-2020 school year.

>> Read More: How do student loans work?

Who can cosign on a student loan?

Many students ask their parents or grandparents to cosign their loans, but it doesn’t have to be someone related to you. Cosigners can be any adult, as long as you know them, trust them, and they understand the obligations they’re agreeing to.

You should also consider their income history and credit when choosing a cosigner. The better their credit score and the steadier their income is, the more likely it will help your chances of approval.

What responsibilities does a cosigner have on a loan?

When someone cosigns a loan, they’re legally responsible for repaying the loan, just as the student is. While that doesn’t necessarily mean the cosigner will be the one making the monthly payments, it could impact their finances down the line.

For example, you may agree to cover the monthly payments while your cosigner helps you qualify for the loan. As long as you hold up your end of the bargain, your cosigner will be fine, and their credit may even improve as you make on-time payments.

However, if you miss a payment or stop repaying the loan altogether, it will have the opposite effect, hurting the cosigner’s credit in the process. You could both be subject to collections attempts and other legal problems as well.

>>Read more: What happens if a student loan cosigner dies?

Pros and cons of adding a cosigner

Bringing in a cosigner has significant advantages, but the move isn’t without risk. If you’re considering taking out student loans with a cosigner, think about these pros and cons first:

Pros

  • You’ll have better approval odds

    Having a cosigner on your application can make it much easier to qualify for your loan, especially if you have little to no credit history or income to your name.

  • You may get better terms

    If your cosigner has excellent credit, high income, or both, it can often qualify you for a lower interest rate than on your own. This will save money over time.

  • You’ll have the motivation to stay on top of payments

    Having a cosigner also provides accountability. Since you know your cosigner may see financial problems if you fail to make payments, it may motivate you to stay on top of your finances and get your payments on track.

Cons

  • Any missed payments can hurt the cosigner

    The biggest downside is that any slip-ups on your part can hurt your cosigner’s credit and cause financial problems. You must stay current on payments if you bring in a cosigner.

  • Releasing your cosigner may not be easy

    Cosigners can sometimes be released of their responsibilities, but not always. We’ll go into this in more detail below.

>> Continue reading about pros and cons of cosigners.

Can a cosigner be removed from the loan?

Some lenders offer you the ability to release your cosigner from the loan after a certain period of on-time payments. This frees them from all responsibilities of the loan, as well as the risks that come with it. Unfortunately, cosigner release isn’t always easy. In fact, according to the Consumer Financial Protection Bureau, about 90% of cosigner release applications are rejected.

To learn more, check out our guide on student loan cosigner release.