The Pros and Cons of Private Student Loans Without a Cosigner

June 7, 2018

Heading off to college is one of the most exciting parts of life. While you may be ready to live in the dorms and experience everything there is to college life, there are also other important things to keep in mind, like how you’ll pay for college.

One of the most important things you’ll have to think about is how you’ll pay for college. While there are scholarships and grants, if you’re like most college students, you’ll need to take out student loans. When applying for private student loans, you have the option to go in with or without a cosigner.

Here are the pros and cons to consider if you’re interested in securing your student loans without a cosigner.

What is a Cosigner?

In the event that you don’t qualify for a private student loan on your own, you can have a cosigner sign off on the loan, which will likely encourage the lender to approve your application. Many college students have a hard time getting approved for private loans on their own because of low credit and low income.

With a cosigner, that person shares the responsibility of the loan. While you’re responsible for paying the loan, if you miss a payment or cannot make a payment, the lender will look to the cosigner to take responsibility.

Pros to Consider

There are many benefits to getting student loans without a cosigner. Here are pros to consider.

Greater Sense of Independence

Going off to college and moving out of your parent’s house is a huge achievement. As a college student you’re probably craving as much independence as possible. By not having a cosigner on your private student loans, you’re able to take a big step towards being financially independent.

Taking on student loans under your own name means that you have to budget your income and figure out how you’ll pay off your loans in the future. Since student loans can take years and years to pay off, having a cosigner tethers you to that person until the loan is entirely paid off.

Opportunity to Build Credit

Chances are you have very little credit as you enter college. But, by applying for student loans in your own name, you have a great chance to build up your credit. By consistently making payments on time you can improve your credit and start to solidify your credit standing.

Working on improving your credit early on means that if you want to refinance your loans in the future, you’ll have a solid credit history which means more favorable interest rates and loan terms.

The Drawbacks

While there are perks to not having a cosigner, there are some drawbacks that you’ll want to keep in mind before applying for student loans through a private lender.

Lower Chance of Getting Approved

One of the biggest drawbacks of applying for a private student loan without a cosigner is that you may not get approved. If you have no credit, poor credit, or minimal work/income history, many lenders will view you as being too high of a risk and declining your application.

The good news is that while you may not get approved for a private student loan, there are plenty of other loan options that you can get approved for without a cosigner. This includes Stafford loans, Perkins loans, Parent PLUS loans, and more.

Bottom line: as a college student, you’re seen as a risky borrower. If you want or are unable to find a cosigner, be sure to look at other options.

Cosigner Risk

Finding the right cosigner can be quite the task. While most people use a family member or a close friend as their cosigner, this can put a strain on the relationship. Cosigners take on a lot of risk when signing for a student loan. If you miss a payment, the lender will look to them to provide the money.

With a cosigner, you have to be entirely committed to making payments on time. Otherwise you risk ruining a relationship and impacting that person’s credit. Be picky about who you choose as a cosigner, and ensure you can make the necessary payments after you graduate.

Cosigner or No Cosigner?

There’s nothing wrong with having a cosigner on your private loans, just as there’s nothing wrong with not having one. The option you choose should be based on your financial situation. If you have good credit and can get approved on your own, go for it! Otherwise, apply for student loans with a cosigner and stick to the repayment plan.

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