Updated
Nov 14, 2022 Private student loans are one way that college students pay for college when federal student loans, scholarships, and savings aren’t enough.
Unlike federal loans, most private lenders base eligibility on an applicant’s credit score and annual income. Unfortunately, most college students can’t meet these eligibility requirements alone.
Because of this, a cosigner may be used to help improve a borrower’s application so long as the cosigner has a good credit score and a steady income.
Adding a cosigner when you apply for student loans can improve your approval odds, but there are advantages and disadvantages to know.
On this page:
- What Does it Mean to Use a Cosigner?
- What are the Pros of Using a Cosigner?
- What are the Cons of Using a Cosigner?
- Deciding if Using a Cosigner is Right for You
- Options if You Don’t Have a Cosigner or Don’t Want to Use One
What Does it Mean to Use a Cosigner?
A cosigner is simply a person added to a loan application in addition to the primary borrower who shares responsibility for repayment. Aside from new private student loans, you can also add cosigners to refinancing applications as well.
In most cases, a cosigner is a parent, relative, or spouse who has a stronger or more established credit history than the student. When the primary borrower does not have a good credit score or has not yet established a foundation of on-time payments or responsible credit use, a creditworthy cosigner may be required to be approved for a private loan.
>> Read More: Can a Grandparent Cosign on a Private Student Loan?
The reason for adding a cosigner to a private student loan application is to give the lender more peace of mind in approving you for a loan. Someone with strong credit is seen as a low-risk borrower, while an individual with a limited credit history is seen as high-risk. If the primary borrower fails to pay the loan as agreed, the cosigner is responsible for making loan payments, just as much as the student.
For reference, the majority of private student loans are cosigned. Federal student loans, on the other hand, do not require cosigners because a credit check is not required and approval is based on the school you are attending and other non-financial factors.
What are the Pros of Using a Cosigner?
Becoming Eligible & Receiving Lower Rates
The primary benefits of having a cosigner are that they help you get approved for a loan and may help you receive a lower interest rate. In addition, you may be approved for a higher loan amount if you have a cosigner.
Building Your Credit Score
In addition to these benefits, a cosigner on a private student loan may also help the primary borrower build their credit history. As long as payments are made on time and in full, private student loans help create a track record of responsible credit use and repayment history for the borrower.
May Help International Students Become Eligible
Lastly, cosigners from the United States may help international students gain approval for a loan that requires borrowers to be citizens or permanent residents.
>> Read More: Student Loans for International Students
What are the Cons of Using a Cosigner?
Cosigner is at Financial Risk
The main risk of using a cosigner is that if you make late payments or don’t make payments at all, your cosigner is left to pick up the pieces. Not only could their credit be damaged, but they could owe a significant amount of money to repay the loan balance, which may become immediately due.
This can damage your relationship with your cosigner, whether a family member, friend, or spouse.
Cosigner May Not Be Able to Get New Credit
Having a cosigner on a private student loan also negatively impacts the cosigner’s ability to get new credit. Depending on the amount of the loan and its repayment terms, a cosigner may have a hard time being approved for other substantial credit accounts, such as a mortgage or an auto loan.
Not All Lenders Offer Cosigner Release
Not all private student loan lenders offer cosigner release which allows borrowers to remove their cosigners from the agreements after a certain amount of on-time monthly payments are made.
The idea here is that the borrower has established enough of a credit history to qualify for the loan on his or her own, or they are responsible enough to cover payments.
Without a release, the cosigner remains tied to the loan unless you refinance it with a different lender in your own name. To compare lenders that allow you to refinance, check out our guide to the best student loan refinance lenders.
If you are looking for a new student loan from a lender that offers cosigner release, here are some lenders along with the number of on-time payments needed before a cosigner can be released:
| Lender | Rates (APR) | Cosigner Release |
| College Ave | 1.24% – 12.99% | After 24 on-time payments |
| Sallie Mae | 1.25% – 12.59% | After 12 on-time payments |
| Citizens Bank | 1.29% – 10.99% | After 36 on-time payments |
| Ascent | 2.71% – 14.50% | After 12 on-time payments |
| LendKey | 1.25% – 11.85% | After 24 on-time payments |
Deciding if Using a Cosigner is Right for You
Cosigners are extremely common with private student loans, but they are not always the most appropriate choice for student loan borrowers. If you can get access to enough credit on your own, based on your own credit score and income, then there may be no need to add a cosigner to your student loan.
Additionally, if you fear the negative outcomes for the cosigner if you fail in repayment, including their damaged credit and relationship with you, cosigning may not be the right choice for you.
If, however, you are in need of financing for your college endeavors and you have no other options aside from private student loans, you may be required to add a cosigner to your application. Be sure to check with your lender before submitting your application to determine the options you have.
Options if You Don’t Have a Cosigner or Don’t Want to Use One
If you don’t have a cosigner or don’t want to use one, there are some options you could consider to find funding for your higher education. If you want to see some lenders who don’t require a cosigner and have less strict eligibility requirements, check out our guide to student loans without a cosigner.
Federal Student Loans
Fortunately, a cosigner is not a requirement for all student loans. Federal student loans do not require full underwriting, meaning you don’t need a credit check or proof of income. Instead, students complete the Free Application for Federal Student Aid, or FAFSA, to see what they are eligible for in terms of federal loans. Direct Loans are an option for undergraduate students while Direct Loans and Grad PLUS Loans are options for graduate students.
State-Based Programs
You may also look to state-based student loan programs that do not require a credit check. These programs vary based on where you live and your level of study, but they may provide options without the need for a cosigner.
Look for Alternative Forms of Financial Aid
Finally, grants, scholarships, and work-study programs are not loans and therefore do not require repayment or a credit check. These can be valuable additions to your overall financial aid package. Be sure to consider federal financial aid as well as local and state-based options.
Bottom Line
Having a cosigner can be helpful in getting you the best student loan to finance your college expenses. However, think through both the pros and cons of cosigning a student loan.
Always take the time to talk with a potential cosigner about these issues and compare your options with different lenders and financing sources before signing on the dotted line.
Also, if you do have a cosigner, be sure to have a repayment plan to ensure that you are successful.