Do You Need a Co-signer for Student Loans?

Are you asking yourself, “Do I need a co-signer for student loans?” The answer depends on several factors, including the loan type. Federal student loans don’t require a co-signer, but private loans may need one.

How to Find Out if You Need a Co-signer for Student Loans

Do all student loans need a co-signer? No, not all student loans need a co-signer. Federal student loans generally don’t, but private student loans may. 

Federal student loan eligibility is based on the information you provide on the Free Application for Federal Student Aid (FAFSA), your school’s cost of attendance, your enrollment status and federal borrowing limits.

Private loans work differently. A bank, credit union or online lender may look at credit, income, debt and the amount you want to borrow. A co-signer may help when the student doesn’t qualify on his or her own. Some lenders may require a co-signer. Others may not require one, but may offer better terms when one is added.

What a Student Loan Co-signer Does

A co-signer agrees to share responsibility for repaying the loan with the primary borrower. According to the Consumer Financial Protection Bureau, this is a legal commitment with real financial risks.

Late or missed payments can affect both the borrower’s and the co-signer’s credit. If the borrower stops paying, the co-signer can be asked to pay.

Why Some Students Need a Co-signer

You might need a co-signer on a student loan if you have little credit history, which is common for young college students. A student may have no steady pay, no long credit record or no history of other debt.

The lender may want another borrower with stronger credit or income to help ensure that the loan will be repaid. 

Getting a Loan Without a Co-signer

Students can often get federal loans without a co-signer by using the FAFSA form. The FAFSA gives access to federal grants, work-study funds and federal student loans.

Private loans without a co-signer may exist, but they may be harder to get if the borrower has thin credit or a low income.

Talking to Someone About Co-signing

Before anyone signs a loan agreement, it’s a good idea to have an honest conversation about what co-signing means. Make sure the potential co-signer understands the loan amount, repayment schedule and what could happen if the student can’t make payments.

According to the CFPB, most private student loans have a co-signer. A co-signer shares equal responsibility for repaying the loan if the borrower doesn’t pay. Because of that responsibility, it’s important to have the conversation early and make sure everyone understands the risks before signing.

Co-signer Release and Later Options

Some private lenders offer a co-signer release later on in the life of the loan. This allows the co-signer to legally detach themselves from the loan. Release may depend on on-time payments, a credit review and proof that the borrower can handle the loan alone.

Release isn’t automatic, and some lenders do not offer it at all. That’s one reason it’s so important to read the loan agreement before signing. Look for rules on missed payments, release, deferment and hardship options.

Final Thoughts

Do you need a co-signer for student loans? For federal student loans, usually not. For private student loans, you might. That’s especially true if you have little credit history or a low income. 

Before borrowing, it can help to compare the loan type, repayment duty and co-signer risk so each person knows what signing means.

FAQ: Student Loan Co-signer