Sunday, June 19, 2011

student loans without cosigner

Before you go ahead and haphazardly look for student loans without a cosigner you must first have an understanding that education loans can be divided into two camps.
The first camp includes student loans that are provided directly by the federal government, and in particular the United States Department of Education. These education loans are typically referred to as federal student loans, and they are based on financial need, and not credit.
The second camp includes education loans that are provided by independent private lenders, and are commonly referred to as private student loans. These loans are based on credit, and you will therefore need to have the appropriate credentials in terms of credit and income in place in order to get an approval. Besides improving your credit and income situation, the only exception to this is if you can come up with a creditworthy cosigner that is willing to cosign for your loan.
Otherwise you will simply have to accept the fact that you will not get approved for a private student loan if you have bad credit, and/ or a low income. The private student loan industry has contracted to a significant extent over the past few years, and there are no private lenders left on the current market that will extend to you a private student loan without a cosigner. This is the stark reality, and while it may bet a bit depressing to hear at first, you can still get federal student loans without a cosigner to finance your college education.

Applying for Student Loans Without a Cosigner

Because federal student loans are not based on credit, they will never require that you provide a cosigner, or submit to a credit check. You can therefore apply for this type of aidwithout a credit history, a job, references, or an income of any kind and still qualify without an issue.
  • This is because they are based on financial need, and not credit, which is ultimately a measurement of the amount of additional funding you need minus any financial aid, and capital you are willing to contribute out of pocket.
Your financial need therefore rises whenever you or your family is unable to contribute a significant amount of money towards your higher education. This means that you will have an easier time getting student loans without cosigner when you have bad credit, no income, and few assets if you first consider your options in regard to federal education loans.
I recommend to students that they apply for these types of loans first before they decide to look into private student loan funding mostly because of this very reason.
That being said, I think it is important for students to know the primary differences between federal and private student loans. Here is a brief overview of some of the basic fundamentals of both federal and private student loans.

Federal Student Loans

  • Based on financial need
  • Department of Education is Lender
  • Low fixed interest rates
  • Flexible repayment terms
  • Capped loan amounts
  • Apply via the FAFSA

Private Student Loans

  • Based on credit
  • Provided by independent private lenders
  • Competitive-to-high adjustable interest rates
  • Limited repayment benefits
  • Loan amounts up to the cost of attendance
  • Apply directly via lender’s application
Federal student loans therefore cost less than most private student loans, although you will typically be able to borrow more money at a time via a private student loan, as they don’t have the same kind of funding limits that federal loans do.
This is the primary advantage of applying for a private student loan, although you will still have to have the appropriate credit score and credit history in place in order to get an approval. If your credit isn’t up to snuff, your only other option is to find a creditworthy cosigner for your private loan.

Timeline for Getting Student Loans and Financial Aid

There is an appropriate timeline for applying for financial aid that I recommend to students, and while it is not meant to be overly complex, it is something that you should abide by if you want to make the process of getting the money you need to attend college a much easier, and more efficient one.
  • Federal/ State Aid + Grants/ Scholarships > Parent Loans > Private Loans > Other Loans > Consolidation
I recommend this timeline to students because there are certain kinds of aid that will cost less than others, although other factors such as available loan amounts, and application deadlines will also play a role. Ultimately you want to maximize your ability to get grants and scholarships, which of course don’t have to be paid back, and lessen your costs when it comes to getting the proper amount of student loan funding.

This means that you should first take advantage of applying for any independent grants and scholarships that may be available to you.
You then need to think about submitting a FAFSA, as this is the government’s universal application for federal student aid, and by completing one by the appropriate deadlines you will be making yourself eligible for the wealth of federal student aid that is available, including federal student loans.
You can get these student loans with no cosigner, as the FAFSA doesn’t require that you submit to a credit check, or provide a cosigner at any time. Once you have submitted the FAFSA you will usually hear a response back from your school of choice a few months later. They will send you an award package that should detail all of the financial aid you have been allocated so far—you then need to determine how much additional aid you will need.
PLUS Loans
This is where PLUS Loans, commonly referred to as parent loans can come into play. PLUS Loans are formally considered as federal student loans, although they are based in-part on credit, and therefore don’t fit the conventional mold of most government student loans. They can be very useful if you can get your parents to take them out on your behalf if you are an undergraduate student, as this is a requirement of the PLUS Loan when you still have not received your degree yet.
Once you have become a graduate student you can get a PLUS Loan all by yourself as the parent requirement is no longer in place. Both undergraduate, and graduate PLUS Loans can provide you with funding up to your cost of attendance. PLUS Loans have a fixed interest rate of 7.9%, and come with a good amount of repayment benefits. They in my opinion should be considered before you look into applying for private student loans.
Private Student Loans
Private student loans should be treated as a “last resort” option when you have exhausted most other forms of financial aid, as they are one of the most expensive types of aid to get when all is said and done. They have little, if any repayment benefits, and they are very difficult to get discharged via bankruptcy.
While they can provide you with funding up to your entire cost of attendance, the drawbacks to this kind of aid can often outweigh the positive aspects, and this is why they should be looked upon before the majority of other types of aid.

Taking Advantage of Federal Student Aid

By following the above timeline you can hopefully get the financial aid you need without paying more than you have to. Getting student loans without a cosigner is really about applying for federal education loans first to see where you stand.
If you still need additional funding you can then attempt to get private student loans without cosigner, although it makes no sense to do so unless you have made significant improvements to your credit situation. Private student loan lenders will not compromise on their approval guidelines 99 percent of the time, and it is therefore in your best interest to have all of your ducks in a row when you apply unless you want to waste your time.
The good news is that there is an extraordinary amount of financial aid available each year that is not based on credit—with a good chunk of this aid being federal student aid. You should be able to get your fair share of this available federal aid by applying via the FAFSA, and the higher your level of financial need is, the better your chances are at getting a larger proportion of aid. Remember that you don’t need to submit to a credit check in order to complete the FAFSA, and to get federal student loans without a cosigner you simply need to fill out this application.
These are essentially student loans for people with bad credit and little income, or in other words—the typical college student! Hopefully you can get a significant amount of funding via these types of federal education loans, and remember to submit your FAFSA as soon as possible in order to improve your chances at being given the maximum amount of federal student aid.