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In fact, most undergraduates enlist a cosigner, such as a parent, to borrow a private loan. Borrowing a student loan with bad credit is not impossible, but you’ll need a creditworthy cosigner to meet a lender’s criteria and access better rates.
Why you might need a cosigner if you have bad credit
If you’re a student with bad (or nonexistent) credit, you’re not alone. Many undergraduate students haven’t had the chance to build a solid credit history yet.
Finding private student loans with bad credit can be difficult, though. Most lenders require a good credit score, which starts at 670 on the FICO scoring model. They also typically want to see a source of income to ensure you have the means to pay back your loan.
If you can’t meet these criteria on your own, you could still qualify by adding a cosigner to your application. A cosigner is someone who’s equally responsible for the debt and agrees to repay it if you fall behind.
“Lenders don’t want to assume the risk of a borrower with a weak credit profile and no income,” explains attorney Michael Lux, founder of Student Loan Sherpa. “Adding a cosigner gives the lender confidence that they will eventually get paid.”
The majority of undergraduates (91%) borrowed a private student loan with a cosigner in the 2022-23 year, according to the Private Student Loan Report by Enterval Analytics, LLC. Among graduate students, that number was still fairly high at 66%.
Private student loan cosigner requirements
A cosigner can be any trusted adult, such as a parent, grandparent, or family friend, willing to share debt with you. However, they’ll need to meet a few financial requirements to help you get approved for a loan. These may include:
- Good credit, with a credit score around 670 or higher (the minimum credit score requirement varies by lender)
- A source of income
- Current employment or sufficient income from other sources
“When it comes to evaluating cosigners, there isn’t a uniform formula followed by all lenders,” says Lux. “Some lenders use the cosigner’s credit profile when determining interest rates, while others tend to focus more on the borrower.”
The rates and terms on a private student loan will vary by lender, but you might find annual percentage rates (APRs) starting around 5% and repayment terms from five to 20 years. You can usually postpone repayment while you’re in school and for six to nine months after you graduate.
You can find a private student loan from various banks, credit unions, and online loan companies. Some colleges and states also provide private loans to qualifying students. Before picking one, it’s a good idea to compare multiple options.
Tips for finding a cosigner for a private student loan
Many students turn to a parent to cosign a private student loan, but your parents aren’t your only option. You could also apply with a:
- Grandparent, uncle, aunt, or other relative
- Family friend
- Mentor or teacher
- Member of your college’s alumni association
Most importantly, your cosigner should be someone you know and trust. Plus, your cosigner must be willing to pay back the loan if you can’t and accept the risk of damage to their credit if you pay late.
Your cosigner must meet the lender’s underwriting requirements, as well. If they don’t have strong enough credit, that person won’t be able to help you qualify for the loan.
“Lenders will want to see a cosigner who has a good credit score and a steady income,” comments Lux.
As mentioned, every lender has its own requirements, and some accept lower credit scores than others. Some also offer cosigner release after a certain number of on-time payments, which may be an appealing option for you and your cosigner.
How to apply for a private student loan
If you need to apply for a private student loan, these steps will help:
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