Sfilling and signing in student loan

by Aidan Kang, CFA
Senior Writer
UPDATED: April 20, 2023

So, you’ve been accepted to the college of your dreams. You are beyond excited and can’t wait for classes to start in the fall. However, there is one small problem – tuition fees. And they aren’t cheap. The go-to answer? Student loans!

Here’s the problem: You are told that you need a cosigner to get approved and you don’t have anyone willing to do that for you. Getting a student loan is hard, but getting one without a cosigner can be even harder. This does not mean, however, that getting approved for a student loan is impossible. You just need to know how to approach this issue so you won’t need a cosigner on the loan agreement.

Why Do You Need a Cosigner for a Student Loan?

Student loan debt has been called the next great American crisis. According to Forbes, 45 million Americans collectively owe over $1.6 trillion dollars in student loan debt and it is growing at an exponential rate. While not every college graduate ends up with this type of massive debt load, there is a significant amount of students that do end up struggling financially because they have too much student loan debt without any way out due to circumstances beyond their control.

To avoid student loan defaults, lenders then require student loan applicants to have a cosigner as a guarantee.

What is a cosigner? A cosigner is another person who signs the loan with you in effect agreeing to pay off the loan if you are unable to do so. A cosigner is often required if you are taking out a loan since you don’t have enough credit history to prove that you can pay back the loan yourself. Having a cosigner boosts your chances if you are applying for a mortgage, car loans, and other types of loans.

In the case of student loans, most students usually ask their parents or relatives to cosign with them. As a cosigner, the parent, grandparent, or family member is guaranteeing that if the student is unable to pay the loan, then they will be responsible to pay for it.

But what if you don’t really have anyone to cosign a loan with you? Can you still get a student loan even without a cosigner? Read on to find out.

Is it Possible to Get a Student Loan Without a Cosigner?

Yes. You can get a student loan without a cosigner. Maybe your parents are not in the position to cosign or you are uncomfortable asking other family members or friends to take such responsibility. This does not mean that your dream of finishing school is done. There are options that you can explore to get a student loan without a cosigner.

What Student Loans Can You Get Without a Cosigner?

Now that you are aware that it is indeed possible to get a loan without a cosigner, you’re probably wondering where to start looking. What types of student loans can you get without a cosigner? Below are some types of student loans that you can apply for.

1. Federal Student Loans

Score: 5/5

Best For: All students looking for student loans without a cosigner with bad credit, no credit, or good credit.

Do you know that you don’t need a cosigner or credit history to get a federal student loan? This should be your first option if you are looking for a student loan without a cosigner and you have bad or no credit.

A federal student loan is a loan administered by the United States Department of Education. They are preferable to private student loans (offered by private lenders) because federal student loans usually have lower interest rates, favorable terms, and benefits that private loans do not offer.

For example, you can apply for deferment or forbearance on your federal student loans if you are facing financial difficulty. This means you can temporarily stop payments on the loan without defaulting on it. During the Covid-19 pandemic, the U.S. suspended the collection of student loan payments. This move impacted millions of student loan borrowers who lost their jobs during the pandemic and could not find the money for the monthly payments.

How Do You Apply for a Federal Student Loan?

You must complete a Free Application for Federal Student Aid (FAFSA) form to start the process. Depending on the results, your school will then send you a financial aid offer and this may include federal student loans.

You can also look for federal grants and scholarships if you have an excellent academic record. If you are accepted, you won’t have to pay back a grant or a scholarship.

2. Credit-Based Student Loan

Score: 5/5

Best For: Students looking for student loans without a cosigner but are employed and have sufficient credit history.

A credit-based student loan is a type of private student loan where your credit will be the basis of approval. Take note that if you qualify for a loan based on your credit history, you don’t really need a cosigner for the loan. This is usually a great option for students who have been employed for a few years already and were able to build a pretty good credit history. If you have been an authorized user on your parents’ credit card for some years now, this could also help your credit score when applying for a credit-based student loan.

So, what credit score is needed for a student loan? To qualify for a student loan, most credit-based lenders require applicants to have a credit score of 670.The higher your credit score, the better terms you’ll get.

3. Merit-based Student Loans

Score: 5/5

Best For: Students with an excellent academic record.

As a student, it’s often difficult to prove your credit-worthiness when you haven’t really gotten the chance to work full-time yet. You are not even qualified to apply for most credit products, so how can you show a good credit history? Because of this, some lenders are using another metric to gauge whether a student is qualified for a loan – their GPA (Grade Point Average).

Instead of checking credit scores, lenders who offer merit-based student loans consider a person’s academic performance as a basis for whether to approve the application or not. The rationale is that, the higher your GPA, the more likely you’ll graduate on time and get a job to pay back the loan.

A.M. Money Student Loans
One example of a company offering such a loan is A.M. Money. They offer student loans with no cosigner and flexible repayment terms. The downside is that it is only available to students of select universities.

Funding U Student Loans
Focused on providing student loans to undergraduates. Looks at the academic performance, graduation threshold of the school, and historical data of the school when approving applications.

4. Future Income-based Student Loans

Score: 5/5

Best For: Graduate students with future high paying income, international students, students who want to study abroad

A future-income student loan looks at your potential instead of your credit score when granting you a loan. In this kind of student loan, the lender will consider your school and the success rate of students attending the school. Most lenders often accept juniors, seniors, or graduate students for these types of loans.

Ascent Non-Cosigned Future Income-based Student Loan
Open to juniors and seniors with an expected graduation date. There is also a GPA requirement to qualify.

Prodigy Finance
Focuses on offering no cosigner, no collateral student loans to international students who want to pursue graduate school. They offer loans in 150 countries, in over 750 schools.

5. Income Share Agreements

Score: 5/5

Best For: Looking for alternatives to traditional student loans.

As an alternative to student loans, you may encounter the term “Income Share Agreements” or ISA when looking to fund your studies. But what exactly is an ISA and how is it different from a loan?

An ISA works differently from a student loan because instead of calculating your payments from the time you took out the loan and requiring you to pay monthly after the graduation grace period passes, the lender will only charge you a fixed percentage of your future income when you actually get a job.

With most ISA agreements, they will charge a percentage of your annual salary which you would have to pay monthly for an agreed number of years. Depending on the term of your ISA, you may end up paying more than what you owe so there is still “interest” in a way, but there is usually a cap or a maximum amount of total payment so you don’t end up paying way over what you borrowed. The usual cap is 2 times to 2.5 times your borrowed amount.

Let’s say you borrowed $10,000 and you agreed to pay 5% of your annual income for 5 years. If your annual income is $60,000, then you have to pay $3,000 a year. The total payment over the 5 years will come up to $15,000, which is $5,000 more than the borrowed amount.

If you are a high earner, you are actually at a disadvantage (in a way) because you would have to pay up to the maximum cap limit. If the cap is 2.5 times, you have to pay $25,000 total. Only if you’re earning very little income will you end up paying less than what you owe.

Another benefit of most Income Share Agreements is that they don’t require their clients to make payments if they are unemployed or are only earning minimum wage. You only start paying again when you get a meaningful salary. This is a good plus point because it prevents borrowers from sinking in student loan debt when they are jobless or barely able to finance their basic needs.

Stride Funding
Stride offers one of the best ISA in the market without cosigners required. They offer as low as 2% for every $10,000 funding, 2 times payment cap (payment will never be more than double of what you borrowed), maximum 5 years repayment plan, and no payments when you don’t meet the minimum income threshold.

Get a Student Loan Without Needing a Cosigner

Before applying for high-interest private student loans to help you with your school expenses, consider all your options first. There are now many different platforms that can help you finance your education without going through the traditional private student loan route. By being diligent about your borrowing, you can avoid being held back by student loan debt in the future.