Student loans are a necessity for many college-bound students. They can be used to pay for tuition, fees, housing and other educational expenses, which can add up to tens of thousands of dollars each year. Financial aid options including scholarships, grants and federal student loans do not require a co-signer. However, undergraduate students may not qualify for private student loans without a co-signer.
How Do Student Loan Co-Signers Work?
Co-signers are creditworthy applicants who agree to share responsibility for repaying a loan. If you don’t repay your student loan according to the terms, the co-signer will be responsible for doing so. This decreases the risk for lenders, making it easier for students to obtain a loan.
Co-signers aren’t an option for every student. Parents or other adults may not have enough income or good enough credit to get approved for a private student loan. Or, they may be unwilling to take on the risk associated with co-signing. After all, co-signers could end up owing money if you don’t pay your student loans. Co-signing a loan could make it more difficult for them to qualify for other loans or lines of credit because they’ve taken on more debt, which would likely increase their debt-to-income ratio. The DTI ratio is the amount you owe compared with what you earn.
“Parents aren’t required to pay for college,” says Brad Baldridge, certified financial planner and college funding consultant, as well as owner of the Taming The High Cost of College website and podcast. “But if they don’t help, the result is it might be near impossible for the student to figure it out.”
If you don’t have someone to co-sign a student loan, you still may be able to get money for school. Scholarships and grants don’t require a co-signer, and they don’t have to be paid back. Eligibility for federal student loans does not depend on your income or credit, so a co-signer isn’t needed.
This guide covers financial aid options that don’t require a co-signer. You’ll learn how to compare private student lenders and see options for what to do if you can’t cover your educational costs without private loans, but can’t find a co-signer.
Can Grants and Scholarships Help?
With grants and scholarships, you can get money for school that doesn’t have to be repaid. It’s one of the best ways to fund your education, and should be a priority over taking out federal or private student loans. Co-signers are not required for grants or scholarships, as they aren’t loans.
“Students should start with free money first,” says Mark Kantrowitz, owner of PrivateStudentLoans.guru and author of the books “Filing the FAFSA,” “Twisdoms About Paying for College” and “Secrets to Winning a Scholarship.” “Search for scholarships. Then, if they must borrow, they should borrow federal loans.”
There are merit-based scholarships, which are awarded based on your grades, athletic abilities or another activity, and need-based scholarships, which take your finances into account. There are also scholarships that are both merit- and need-based, and others that you can qualify for no matter your grades or income.
You may need to prepare for scholarship applications far in advance, as some require you to submit school transcripts and letters of recommendation. Other scholarships may simply require a short essay with your application. Start looking before you go to college and continue searching while you’re in college, as there are opportunities at all grade levels.
There are millions of scholarships available. Use these resources for finding available scholarships:
- Check online at , for-profit and nonprofit sites. Also check your school’s website and local organization websites.
- Ask your high school counselor and your college or university’s financial aid office for suggestions. They may know of opportunities that are specific to where you live, where you want to go to school or your major.
- Look for listings from local businesses, nonprofits and community groups. There may be less competition for local scholarships than ones that are available nationally.
- Look for scholarships from organizations that you have some connection to, perhaps based on your gender, nationality, major, job, a parent’s employer, religion or another identifier.
In addition to scholarships, there are state or federal educational grants. These are generally merit- or need-based. As with scholarships, you generally don’t need to repay the money as long as you meet the requirements of the grant.
How Do Federal Student Loans Work?
Scholarships and grants are preferable to loans, but if you need to borrow money, federal student loans are likely your best option. This is especially true if you don’t have a co-signer, as co-signers are not required for undergraduate federal student loans.
Federal student loans are preferable to private student loans for students without a co-signer because they aren’t issued based on an applicant’s credit or income, so you may be able to get a much lower interest rate on a federal loan than you could with a private loan without a co-signer. They also offer a variety of repayment plans, forgiveness programs and hardship options that can make it easier to repay the loan. These federal options aren’t available with private student loans. However, some private student loans offer different repayment plans and hardship options, which vary by lender.
Types of Federal Student Loans
If you’re applying for federal student aid as an undergraduate, there are two types of federal student loans available.
Direct Subsidized Loans and Direct Unsubsidized Loans are part of the William D. Ford Federal Direct Loan Program. These loans are also referred to as Stafford loans or direct Stafford loans. The primary difference between subsidized and unsubsidized loans is that with a subsidized loan, the government makes your interest payments while your loan is in deferment.
Direct PLUS Loans are for parents of undergraduate students, and graduate students and professional degree students.
Federal Student Loan Limits
The amount you can borrow each term or year depends on your financial need, which the Department of Education defines as the difference between the cost of attendance at your school and your expected family contribution.
In addition, there are maximum loan limits regardless of your financial need. For dependent undergraduate students, the limits on how much you can borrow with federal student loans are:
- Direct loans, first year: $5,500 total, $3,500 of which can be subsidized
- Direct loans, second year: $6,500 total, $4,500 of which can be subsidized
- Direct loans, third year and beyond: $7,500 per year, $5,500 of which can be subsidized
In total, you can’t borrow more than $31,000 in direct loans, and only $23,000 of that can be subsidized. Also, even if you’re under the lending limit, you can’t receive Direct Subsidized Loans for longer than 150% of the published length of your program (e.g., six years if you’re in a four-year program).
Federal loan limits are one reason students may need to turn to private student loans or other sources of funding to pay for school.
Increasing your loan limit. If you’ve hit your loan limit for the year, you may still have options. Kantrowitz encourages students who have hit their annual loan limit to ask their parents to borrow from the federal Parent Direct PLUS Loan program.
“If their parents are denied a Parent [Direct] PLUS Loan because of an adverse credit history, [students] can qualify for the higher unsubsidized federal Stafford loan limits available to independent students,” he says. Those limits are $4,000 higher each year, with an aggregate limit of $57,500 for undergraduates.
You can determine ahead of time if your parent may have an adverse credit history by reviewing the definition on StudentAid.ed.gov.
Federal Student Loan Interest Rates and Disbursement Fees
All students receive the same federally determined interest rate on federal student loans, regardless of income and credit. However, the rate may change depending on the loan type, and whether you’re an undergraduate or graduate student. Congress can change the rate in the future, but the changes affect all borrowers equally.
Federal student loans are fixed-rate loans, meaning the interest rate won’t change once you receive the loan. In the past, there were also variable-rate federal student loans, but those are no longer available.
For federal student loans disbursed before July 1, 2018, the interest rates are:
- 4.45% – Direct Subsidized Loans (for undergraduate students)
- 4.45% – Direct Unsubsidized Loans (for undergraduate students)
- 6% – Direct Unsubsidized Loans (for graduate or professional students)
- 7% – Direct PLUS Loans (for parents and graduate or professional students)
Military members have different limits on interest rates under certain circumstances.
Although subsidized and unsubsidized loans have the same interest rate, you may pay more in interest with unsubsidized loans. With a Direct Subsidized Loan, the government pays the interest that accrues while you’re in school at least half-time, during the six-month grace period after you leave school and if your loans are in deferment. With unsubsidized loans, that interest accrues and is added to your loan principal when you start to make full monthly payments.
Disbursement fees. In addition to interest payments, federal Direct Subsidized Loans and Direct Unsubsidized Loans issued from Oct. 1, 2018 through Oct. 1, 2019, have a 1.062% disbursement fee.
Parent Direct PLUS Loans issued during that same period have a higher 4.28% disbursement fee.
Disbursement fees are automatically deducted from the money that’s sent to your school. You should calculate this cost when you determine your budget for school.
Federal Student Loan Benefits
Federal student loans offer a variety of benefits that can make it easier to afford your monthly payments, allow you to have part of your loan balance forgiven and help you recover if you default on your loans.
Auto-pay discount. Direct loans offer a 0.25% interest rate discount if you sign up to automatically pay your monthly payment from a bank account each month.
Multiple repayment plans. Your federal student loans may be eligible for different repayment plans, and you can switch between plans for free. The 10-year standard repayment plan offers the lowest overall cost of borrowing. However, if you want to lower your payments (which may also increase your total cost of borrowing), you may be able to switch to the graduated or extended repayment plan.
There are four income-driven repayment plans, which set your monthly payment based on your income. If your income is low enough, your monthly payment could be $0. After making 20- to 25-years’ worth of payments ($0 payments included), your remaining loan balance could be forgiven.
Forbearance and deferment options. You may be able to temporarily stop or lower your payments by putting your loans into forbearance or deferment. There are some situations when you’re guaranteed to get approved, such as when you’re enrolled at least half time in an eligible college, or if your total monthly payments equals 20% or more of your monthly gross income. At other times, you have to apply and let the loan servicer decide.
Options after defaulting. If you stop making loan payments, your loans may go delinquent, and you can go into default on the debt. When you default, your entire balance becomes due immediately. You’ll default on your federal student loans if you’re more than 270 days behind on your payments. However, there are options to get your loans out of default and remove the default from your credit report.
Private student loans may default sooner and may not offer rehabilitation options.
You can consolidate loans without losing benefits. Federal student loans may be eligible for the Direct Loan Consolidation program. Consolidating your federal loans won’t save you money, but it could make you eligible for different payment plans, lower your monthly payment, renew your time limit for forbearance or deferment, or help you get your loans out of default.
Forgiveness, cancellation and discharge programs. Your federal loans may be eligible for forgiveness, cancellation or discharge in certain circumstances. These include when your school closes and you’re not able to finish your program, if you die or become totally and permanently disabled, and if you make 120 qualifying monthly payments while working full time for a nonprofit or government organization.
Submit a FAFSA Every Year to Qualify
Submitting the Free Application for Federal Student Aid, or FAFSA, is a requirement to qualify for federal student loans, grants and work-study awards. Some state- and school-based aid also depends on your FAFSA, and you may need to submit it to qualify for scholarships or grants.
Estimating your aid. Before you submit your FAFSA, you can use the FAFSA4caster tool to get an estimate of how much federal student aid you could receive. The tool can help you create a financial plan for the upcoming years, compare costs at different colleges and determine if you’ll have a financing gap that you’ll need to fill some other way.
Applying. You don’t need to pay someone to fill out or submit the FAFSA. There are helpful guides that can walk you through the process, and it takes most people less than an hour to complete and submit the FAFSA for the first time.
You can submit the form electronically, by printing and mailing a copy, or by mailing a traditional paper copy. Paper copies are available at libraries, from guidance counselors or by calling the Federal Student Aid office at 800-4-FED-AID.
Unless you’re an independent student, the FAFSA requires information from your parents, such as previous tax returns and Social Security numbers. Even if you don’t live with your parents and neither parent claims you as a dependent for tax purposes, you may still be considered a dependent student.
In some cases, parents may not want to share their information, perhaps because they haven’t filed a tax return when they should have, they’re going through a heated divorce or they wrongly believe sharing their information will lead to them taking on debt.
If you’re having trouble getting information from a parent, fill out the FAFSA as best you can and go directly to your college or university’s financial aid office, suggests Baldridge. “Within guidelines, colleges have authority to alter the FAFSA,” he says.
Deadlines. The FAFSA submission period is from Oct. 1 of the year before the school term to June 30 two years later. For example, if a student attends college from July 2019 to June 2020, you can submit the FAFSA for that term from Oct. 1, 2018 to June 30, 2020.
Though the federal submission deadline offers more time than before, colleges and states may have earlier deadlines. Some states and schools award aid on a first-come, first-served basis, so don’t wait. It could pay to submit your FAFSA as early as possible.
Renewal. Your FAFSA application doesn’t carry over to the next year, so you should resubmit a FAFSA every year.
How Do Private Student Loans Work?
If you’re considering private student loans, you’ll want to compare lenders. Unlike with federal student loans, private loan offerings and benefits can change from one lender to another. The interest rate you receive can vary, which can lead to large differences in how much you repay over your loan’s lifetime.
You may not be able to get a private student loan without a co-signer.
Most undergraduate students don’t have an established credit history or steady income, and it can be incredibly difficult to qualify for a private student loan on your own.
Realistically, you may not be able to qualify for a private student loan at all. And if you do, a lack of credit or income could result in loan offers with high interest rates.
Here are four key areas to consider when comparing private student lenders:
Types of private student loans. Lenders may offer different types of private student loans. For example, some lenders have student loans for community college or trade schools, undergraduate schools and graduate schools. Some offer special loans for health professionals, graduate business students or law school students. Even among the loans for the same degree, a single lender could offer loans with different interest rate types and terms.
Different loan terms. Your loan’s term is how many years you have to repay the debt. Student loan terms vary typically from five to 20 years, and lenders may offer you several options in that range. The term starts when you begin making full payments, which may be when you drop below half time or after your post-graduation six-month grace period.
Short-term loans may offer a lower interest rate than long-term loans, but monthly payments tend to be higher. Even with its higher interest rate, a longer-term loan may be a safer option since your required monthly payments will be smaller. If you can afford it, you can make additional payments each month and repay the loan early to save on interest.
Interest rate types. You may be able to get either a fixed-rate or variable-rate private student loan. There are pros and cons to either interest rate type, and you should consider the differences upfront as you may not be able to make a change later.
Variable-rate loans tend to offer a lower interest rate at first, but your interest rate is tied to an outside interest rate (such as the prime rate or another benchmark rate that’s used for many types of variable-rate loans). If the benchmark rate rises or falls, the interest rate on your loan, and your monthly payment, could change.
There may be a cap to how high your interest rate can rise with a variable-rate loan. But if your interest rate gets too high, making payments could prove to be difficult and you will pay a lot in interest by the time you repay your loan.
Fixed-rate loans may be a safer option, since you lock in the interest rate when you take out the loan. You can therefore plan for the future, as your monthly payment won’t change. However, fixed-rate loans tend to have a higher initial interest rate than variable-rate loans, so you may initially pay more in interest.
Loan limits. Private student loans often have minimum and maximum loan amounts. The minimum amount is often about $1,000 to $5,000. The maximum could be your school-certified cost of attendance, minus the financial aid you’ve already received. However, there may also be an aggregate maximum loan amount, based on the sum of your outstanding federal and private student loans.
Qualifying for Private Student Loans
Private student loan eligibility can vary between lenders, but the following criteria are common:
Citizenship status. You may need to be a U.S. citizen, national or permanent resident alien to qualify for a private student loan. International students and undocumented residents may only be able to qualify with an eligible co-signer.
An approved school. Lenders may only offer private student loans to students who are attending certain schools and enrolled in at least a half-time course load. The school list depends on the lender, and you may need to begin the application process or call a lender to determine whether a school qualifies.
Age. Regardless of your income, credit or other qualifications, you may need to be at least the age of majority in your state of residence to qualify for a loan without a co-signer.
Income. Students don’t often have a high income, which is one reason it’s hard to qualify for a loan on your own. If you have a part- or full-time job while you’re also at school, that could help you qualify for a loan. Your debt-to-income ratio, which is your monthly debt obligations divided by your gross monthly income, can also be important.
Credit history. Lenders’ credit requirements may include a minimum credit score and length of credit history. For instance, even if you have a good credit score, you may not qualify for a loan if you don’t have at least two years of credit history.
Private Student Loan Costs
Your interest rate is one of the largest factors in your overall cost of borrowing. However, don’t assume that the lender with the lowest advertised interest rate is your best choice. The lowest advertised rate may only be available to the most creditworthy borrowers, and if you have no co-signer, or have a limited credit history and income, you may not be able to receive that rate.
Additional fees. While your interest rate may be the most important factor in terms of your long-term costs, you should compare other potential fees before submitting your applications.
- Application fee. A lender may charge a nonrefundable application fee that you have to pay, even if you don’t get approved.
- Origination fee. Some private lenders charge an origination fee, which may be based on your total loan amount and deducted from your disbursed loan.
- Late fee. If you don’t make your monthly payments on time, lenders may charge you a late fee. It could be a percentage of the amount past due, and there may be a cap, such as $15 or $25.
Keep in mind many private student lenders don’t charge application or origination fees, so it may be easy to avoid them. And, federal law prohibits lenders from charging prepayment penalties on student loans, although you will see many advertise the lack of that fee as a feature.
Additional Options From Private Student Lenders
Private student loan companies offer a variety of additional features to borrowers, such as savings opportunities and assistance when you’re having trouble making payments.
Auto-pay savings. Many lenders will offer you a 0.25% interest rate discount if you sign up for automatic payments. Or, they may requre automatic payments and factor the discount into their published rates.
Additional savings. You may be able to get an additional 0.25% to 0.5% interest rate reduction if you are a current customer of the lender when you apply for your student loan. For example, you could open a checking account to become eligible. And, the interest rate reduction may stay for the life of the loan, even if you close the account.
Lenders may also offer other cost-savings benefits, such as a cash-back reward if you maintain a good GPA.
Repayment plans. Private lenders could offer several repayment plans on their student loans. You may be able to defer your payment completely until after you graduate or leave school, make interest-only payments while you’re in school or make a fixed monthly payment (such as $25) while you’re in school. With the latter two options, your full principal and interest payments may start after your graduate or leave school.
Discharge due to death or permanent disability. A discharge benefit can keep your student loans from eating into assets that would otherwise get passed on to your heirs or beneficiaries. Some, but not all, private lenders offer this benefit.
Hardship options. Some lenders let you put your loans into deferment or forbearance, which are periods when you don’t need to make payments. However, you make payments on the loan again once these periods are over.
Deferment often applies when a borrower returns to school, takes on a service job (such as the Peace Corps) or is deployed in the military. Forbearance is generally for unexpected financial emergencies, such as when you lose a job or have a medical emergency. Lenders may also offer other hardship options, such as a temporary interest rate reduction or monthly payment reduction.
Although interest still accrues on your private student loans during deferment and forbearance, this could keep you from incurring late payment fees or defaulting, which can hurt your credit and result in immediately owing your loan balance.
Hardship options vary from one lender to another, and unlike with federal loans, there may not be guaranteed hardship options. There could also be limits on how long the hardship benefit lasts.
How Can You Compare Private Student Loan Providers?
Many banks, credit unions and online lenders offer private student loans, and even if you know what to look for, it can take a lot of time to compare all the fine print. Still, it’s important to compare your options. The research you do now could lead to a lower interest rate or better benefits, which could save you a lot of money in the future.
You can find reviews of private student lenders online, and comparisons and recommendations for some of the top private student lenders. If you’re comparing lenders on your own, find out if they offer loans to students without co-signers. Additionally, looking for the different loan types, terms, eligibility requirements and benefits could help you narrow in on lenders that will work for your situation.
Compare preapproval rates. Some lenders let you check to see if you’re eligible and show you approximate interest rates with a soft credit inquiry, which doesn’t hurt your credit. Get preapprovals from all the lenders you’re considering so you can compare offers.
Submit multiple applications during a short period. Based on your research and preapproval results, you can narrow down your list of potentially good-fit lenders. Then, submit multiple official applications within a narrow window. While each one will result in a hard inquiry, multiple hard inquiries for student loans made during a 14- to 45-day period (depending on the credit scoring model) only count as a single inquiry for credit scoring purposes.
What Are Your Options if You Can’t Get a Student Loan Without a Co-Signer?
You’re not alone if you’ve applied for private student loans without a co-signer and aren’t able to get approved. If your scholarships, grants and federal aid won’t cover your costs, you may need rethink your path.
Consider a less expensive school. You may have been admitted to your dream school, but if you can’t afford all the expenses, it may not be a good fit after all. Even if you can get a private loan to cover your gap in funding, without a co-signer, the interest rate may be so high that you’ll wind up with a debt load that will be difficult to manage after graduating.
“The path for low-income students is lower-cost state schools, living at home and working while at school,” says Baldridge. Although it may not be ideal, lowering your tuition, room and board expenses, and adding to your income while in school is sometimes the only way to make your finances add up.
Starting at a local community college is an inexpensive option. You may be able to get your general education requirements out of the way, and then transfer to a four-year college or university to finish your degree.
Talk to the school’s financial aid office. If you’re looking for additional funds because of a change in your, or your family’s, financial situation, reach out to the school’s financial aid office. “Sometimes, colleges will make adjustments to the financial aid package when justified by special circumstances,” says Kantrowitz. This could lead to changes in your financial aid package and additional loans, grants or work-study awards.
Cut back on educational expenses. If you’re close to having enough savings and financial aid to pay for school, but there’s a small gap you want to fill, you may be able to cut expenses rather than find more aid. For example, you might be able to share an apartment with two or three other people and pay less for housing. You can save on textbook costs by buying used books, renting them or using free reference copies at the library. And some schools also have food banks, where you can find free food. These may not be ideal situations, but they’re worth considering if they can help you stay in school and avoid high-interest debt.
Take a gap year and build your credit and savings. If you’ve been admitted to a school but can’t afford it, you could ask to take a gap year. You’ll maintain your admission at the school the following year and have a year to get your financial affairs in order. While gap years may be more commonly associated with world travel or community service, you could take the year to work and build up your savings, ideally in a position that’s related to an interest you want to pursue in school.
Your income could make you eligible for a secured credit card or credit-builder loan, which you can use to build your credit. If you get a credit card to build your credit, only use it for a small purchase every month, such as your phone bill or Netflix subscription, and be sure to pay the bill in full. Carrying a balance could hurt your credit and lead to paying interest.
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