Do you need a cosigner for a student loan?

Kathryn B. Hauer, CERTIFIED FINANCIAL PLANNER (TM)

@KathrynHauer • 10/18/16 This answer was first published on 10/18/16. For the most current information about a financial product, you should always check and confirm accuracy with the offering financial institution. Editorial and user-generated content is not provided, reviewed or endorsed by any company.

Permalink Report Abuse

Hi! Why do the answers to so many questions start out “It depends”? In answer to your question, if the student loan is one from the Federal government, then no co-signer is needed. The student is not expected to have a credit history, either, so a credit check isn’t part of the loan award process. However, Federal loan amounts may not be enough for you to cover college tuition and expenses and then you may need to take out a private loan. Private loans do require credit checks, and it is unlikely that a high school student would be able to qualify. Therefore, the parent takes out the loan for the student or co signs the loan. Either way, if the student doesn’t pay back the loan after graduation, the co-signing parent is liable. Students applying for college should complete the FAFSA and exhaust all the Federal grant and loan opportunities they may qualify for before turning to private sources.

The FAFSA website lists Federal grants and loans. They include:

Grants are typically awarded on the basis of need and generally do not have to be repaid. There are four types of federal student grants:

· Federal Pell Grants are usually awarded to undergraduate students who have not yet earned a bachelor’s degree. (In some cases, students enrolled in postbaccalaureate teacher certification programs may receive Federal Pell Grants.) The maximum Federal Pell Grant award for the 2017-2018 award year is $5,185; however, the actual award depends on the student’s financial need, the college’s cost of attendance, the student’s enrollment status, and the length of the academic year in which the student is enrolled. Students can receive the Federal Pell Grant for up to the equivalent of 12 semesters.

· Federal Supplemental Educational Opportunity Grants (FSEOG) are awarded to undergraduate students with exceptional financial need. The amount of the award is determined by the college’s financial aid office, and depends on the student’s financial need and the availability of funds at the college.

· Teacher Education Assistance for College and Higher Education (TEACH) Grants are awarded to students who intend to teach in a public or private elementary or secondary school that serves students from low-income families. If the service requirement is not fulfilled, it could turn into a loan.

· Iraq and Afghanistan Service Grants are awarded to students whose parents or guardians were members of the Armed Forces and died as a result of performing military service in Iraq or Afghanistan after Sept. 11, 2001. To qualify, a student must have been under 24 years of age or enrolled in college at the time of the parent’s or guardian’s death.

Loans consist of money that the student borrows to help pay for college, and must be repaid (plus interest). There are two federal student loan programs:

· The Federal Perkins Loan Program is a campus-based program that provides low-interest loans to undergraduate and graduate students. The amount of the award depends on the student’s financial need, the amount of other aid the student receives, and the availability of funds at his/her college.

· The William D. Ford Federal Direct Loan Program enables students and parents to borrow money at low interest rates directly from the federal government. The Direct Loan Program includes Direct Stafford Loans, which are available to undergraduate and graduate students, and Direct PLUS Loans, which are available to parents of dependent students and to graduate and professional-degree students. A Direct Stafford Loan might be subsidized or unsubsidized. Direct PLUS Loans are always unsubsidized. Subsidized loans are based on financial need and are available only to undergraduate students. The federal government pays the interest on subsidized loans while the borrower is in college and during deferment. Unsubsidized loans are based on the student's education costs and other aid received. The borrower must pay all accrued interest on unsubsidized loans.

If a student needs more money for college, he or she would then turn to other sources that would require a credit check and good credit, including Direct Plus or Parent Plus loans (these are Federal loans), banks, credit unions, the college itself, etc.

This government website explains the difference between Federal and private loans in detail.

Hopefully this answers your question! If not, please write back to us!