With high school graduation fast approaching, figuring out how to pay for college is top of mind for many students. That's especially true if circumstances prevent a parent or guardian from cosigning for student loans. But all students are eligible for federal student loans—also known as Direct or Stafford Loans—regardless of need, and student loans obtained through the federal government do not require a cosigner.
How Do I Apply for Federal Student Loans?
To be eligible for a federal student loan you must submit the Free Application for Federal Student Aid (FAFSA) form. You can complete the FAFSA application online at the U.S. Department of Education's website. Your college uses the FAFSA to determine your financial aid package, including federal student loans. (See: The 7 Biggest FAFSA Mistakes Students Make—and How to Avoid Them)
When Do I Apply for Student Loans?
The Federal deadline is at the end of the academic calendar. For example, the deadline for the 2018-2019 academic year is June 30, 2019. But here's the tricky part: state deadlines are much earlier, and requirements vary by state. Click here for specific state financial aid deadlines, as well as deadlines for the school you will be attending.
Do I Have to Have Good Credit to Get a Federal Student Loan?
You can get a federal student loan with no credit history. There is no check of your credit report or a required minimum credit score, and federal student loans do not have an income requirement.
How Much Can I Borrow Without a Cosigner?
For the 2018-2019 academic school year, Stafford loan limits are:
|Year||Dependent Students||Independent Students|
|First-Year Undergraduate Annual Loan Limit||$5,500||$3,500|
|Second-Year Undergraduate Annual Loan Limit||$6,500||$4,500|
|Third-Year Undergraduate and Beyond Annual Loan Limit||$7,500||$5,500|
|Graduate Students Annual Loan Limit||Not Applicable||$20,500 (Medical Students: $40,500)|
|Unsubsidized Aggregate Loan Limit||$31,000||Undergrads: $57,500 Grads: $138,500|
|Year||Dependent Students||Independent Students|
|First-Year Undergraduate Annual Loan Limit||$3,500||$3,500|
|Second-Year Undergraduate Annual Loan Limit||$4,500||$4,500|
|Third-Year Undergraduate and Beyond Annual Loan Limit||$5,500||$5,500|
|Graduate Students Annual Loan Limit||Not Applicable||Not Applicable|
|Subsidized Aggregate Loan Limit||$23,000||$23,000|
Note: Table above shows the different limits for both undergrad and graduate students. Undergrad loan limits are different for students who are claimed as dependents on a tax return or students who are independent or whose parents do not qualify for a federal PLUS loan.
Total federal loan borrowing for graduate students can't exceed $138,500 which includes any undergraduate federal loan balances. (Limits for certain medical training is $224,000, including undergraduate federal loans.)
Which Type of Student Loans Require a Cosigner?
Private student loans typically require that students have a cosigner. Banks, credit unions, and online lenders offer private student loans. Because the loans are not backed by the federal government, lenders require that a borrower have a solid credit score and income. Young adults who can't meet those requirements can typically get a private student loan only if someone with solid finances agrees to be a cosigner.
What Are the Downsides of Cosigning a Student Loan?
Anyone who cosigns for a loan effectively becomes a co-borrower and is equally responsible for the repayment of the debt. Asking someone to be a cosigner creates financial risk for that person.
The loan amount shows up on the cosigner's credit reports, which may impact their ability to qualify for other loans or credit; and if payments are late, it will have a negative impact on a cosigner's credit score.
In a survey of parents who have cosigned, more than one-third report that their child has been late with a student loan payment, and more than half said their credit score has been negatively impacted.
Can I Get a Private Student Loan without a Cosigner?
Private student loans are much different than federal student loans. Building a solid credit score or having a good credit score already is almost always necessary to obtain a private student loan without a cosigner, and it will increase your chances of getting approved and good terms for the loans, such as a lower Annual Percentage Rate (APR).
Even without a cosigner, the interest rate on a private student loan—typically a variable interest rate that can change over time—may be higher than the fixed interest rate available on federal loans. Federal loans also have more flexible repayment options than private student loans. Sticking with federal student loans can be your best borrowing option, and you will never need to sweat finding a cosigner.
Editorial Disclaimer: Opinions expressed here are author's alone, not those of any bank, credit card issuer, or other company, and have not been reviewed, approved or otherwise endorsed by any of these entities. All information, including rates and fees, are accurate as of the date of publication.