Hey guys, Robert from The College Investor here, and I am excited to have a short video
with you today about how to get a private student loan with no co-signer.
So, the fact is that the CFPB has recently had a study done, and 90% of private loans
had a co-signer.
Now, why are co-signers hard on people?
Well, because the co-signer is equally as responsible as the borrower when it comes
to paying back that student loan debt, and that can be hard, because if the student doesn't
make payments, it could hurt the other persons credit, and even in crazy scenarios, like
if the student dies, the co-signer is a hundred percent responsible for that loan.
So not only is there trauma with a student dying, but the parents or whoever co-signed
is still on the hook for the debt.
So whenever it's possible, I always try to recommend people get a private student loan
with no co-signer.
Now I realize it's not realistic for many people, and we're going to talk about why,
but let's dive in, and we're going to show you how to qualify for a private student loan
with no co-signer.
To start with, private student loans operate much like auto loans, or mortgages.
So with a private student loan, the collateral on the student loan is your earnings.
So you can get a higher limit because you're young.
The banks or the lenders think that you're going to make a lot more in the future.
Then based on US law, they know that you can't really get rid of these loans in bankruptcy,
and that there's a lot of ways for them to collect on this debt, so it's a very safe
loan for banks to lend to you.
But that doesn't mean they're great for you.
So when lenders are looking to lend a private student loan, they're looking for three criteria.
First off, you have to be a US citizen, the reason going back to that law piece.
They want to be protected.
You have to be a US citizen.
Second, most lenders are going to want to see a good credit history.
Now this is hard for when you're 18, 19, 20, 'cause you don't really have a credit history,
but if you want a private student loan with no co-signer, you need to have a good credit
history, a score of 700 or higher.
They want to see payments made on time for a couple of years.
So that's a challenge.
One way to get around this is to maybe have yourself added as a authorized user on your
parents credit card, because now their credit history on that card becomes your credit history
on that card, and that can help.
But the third one is what kind of derails most people, is that most banks and lenders
for private student loans offering no co-signer loans, want to see income as well.
On average they want to see about $25,000 a year in income.
Now summer jobs, and working on the side, all that income counts.
It just needs to be on your tax return, so no under-the-table money.
But if you're not making about $20,000, $25,000 a year, you're going to have a hard time combining
that with your credit history, to get a private student loan with no co-signer.
So if you want a private student loan with no co-signer, I recommend checking out Credible.
They have private student loans there, and you can see if you would potentially qualify
for a private student loan with no co-signer, but once again, it's a challenge, 'cause you've
got to meet those three criteria that typically hold people back.
Now, if you're going to get a private student loan, and you end up having to get a co-signer,
at least do it the right way.
We have a full blog post on the blog about how to get a private student loan with a co-signer
the right way.
The big thing is make sure you guys set rules and boundaries for each other about making
payments on time, and we highly recommend that whoever the co-signer is gets a life
insurance policy on the borrower, so that if anything were to happen to them, the loan
can be paid off.
So hopefully that helps you understand what it takes to get a private student loan with
no co-signer.
I know it's tough.
It's hard for someone that's 18, 19, 20, 21, to meet those criteria, but that's what banks
are looking for when it comes to lending money.
All right guys.
Now we're going to get into a reader question.
This weeks reader question is from Nicole, and Nicole asks, "Should I consolidate my
student loans?"
The answer is, maybe.
So a student loan consolidation is a process that's offered for free by the Department
of Education, that allows you to take multiple federal student loans, and put them into a
single loan.
The benefit of this is just convenience.
So instead of making seven loan payments individually, you can make one payment.
Now, for most people though, a lot of their loans are at one company, so if you graduate
and all of your loans are at Navient, or all of them are at FedLoan, well you're already
effectively consolidated, because you're just making one payment on one statement.
If your loans are at multiple servicers, consolidating can be very helpful because now instead of
having two or three different bills every month, you can have it all consolidated to
one loan at one company.
The important thing to remember is that student loan consolidation doesn't change anything
with your loans.
It's not going to lower your interest rate or your payment.
Your new consolidation loan is going to be the average weight of all the underlying student
loan interest rates.
So effectively the math works out that you're basically paying the exact same thing.
Now with your new consolidation loan you can change repayment plans and do other things
that could potentially lower your payment, but just getting a consolidation loan, and
consolidating your student loans alone, isn't going to change anything.
So the question is really, what do you prefer?
Do you want to have a single payment with a single loan?
Then consolidating could make sense for you.
If it doesn't really bother you how your current setup is, then consolidating doesn't really
make sense.
There are two things that you should never do when it comes to student loan consolidation.
Number one is never consolidate a parent plus loan into your student loans.
If you do that, you're shooting yourself in the foot, because there are a lot of repayment
plans now that you can not access because you have a parent plus loan in that consolidation
loan.
The number two thing you should do, is you should never consolidate a loan you've already
been making IBR, pay-as-you-earn, or revised pay-as-you-earn payments on already.
Because when you consolidate it will reset the clock on any forgiveness.
So if you've already been paying a loan under IBR for five years, and you're expecting to
get forgiveness in 20 years, if you consolidate you reset the 20 year clock.
So you just basically gave yourself five more years of student loan payments.
So keep that in mind, that consolidating, it's a new loan that you're taking out basically.
It's a new loan.
It's going to say consolidation loan, and that loan will be treated differently than
any loan you had previously, so you could reset the clock on forgiveness.
All right guys, hopefully that answers your question about student loan consolidation.
If you have any questions, as always, please email them to me.
I do get a lot every single week now, so I might not be able to put yours on a video,
but if it's the best question, and it's really informative and asks a great thing, I will
definitely include it on the show.
So thank you guys very much.
If you like what you're seeing, please like and subscribe, and I hope to see you guys
on the blog.
Until next time, thanks guys.