You may be able to finance student loans without a cosigner as long as you meet specific lender requirements. Refinancing is when a private lender like a bank, credit union, or online lender pays off some or all of your existing student loans and replaces them with a new loan.
A cosigner is an individual with good credit who agrees to repay the loan if you, the primary borrower, cannot. A cosigner may give a student without a strong credit history a better chance of being approved for refinancing and also help them secure a better interest rate on the loan. However, it is possible to refinance loans with no cosigner if you meet certain conditions.
Read on for more information about student loan refinancing without a cosigner and what it involves.
Key Points
• Refinancing student loans without a cosigner requires a good credit score, a solid credit history, and a stable income.
• A lower debt-to-income ratio increases the chances of qualifying for student loan refinancing.
• Refinancing student loans can potentially result in a lower interest rate. It also streamlines student loan payments by consolidating multiple loans into one.
• Refinancing federal student loans turns them into private loans and results in the loss of federal benefits like federal loan forgiveness programs.
• Alternatives to refinancing include income-driven repayment plans and loan forgiveness programs.
Understanding Student Loan Refinancing
With student loan refinancing, a private lender pays off your existing student loans, whether they are private student loans, federal student loans, or a mixture of both. The lender then issues you a new loan with a new interest rate and loan terms.
Ideally, refinancing student loans allows you to get a lower interest rate or more favorable loan terms. The loan interest rate, which is a percentage of your principal amount borrowed, is the amount you pay to your lender in exchange for borrowing money. A lower interest rate can help you save money on your monthly student loan payments.
When you refinance, you may be able to change the repayment terms of the loan. For instance, if you need more time to repay the loan and smaller monthly payments, you may be able to get a longer loan term. However, this means that you will likely pay more in interest overall since you are extending the life of the loan. Alternatively, if you are refinancing student loans to save money, you might be able to get a shorter loan term so that you can repay the loan faster, helping you save on interest payments.
Refinancing can also help you manage your student loan payments by streamlining the process. Instead of having to keep track of multiple loans with different due dates and balances, with refinancing you have just one loan to repay.
You can refinance both federal and private student loans, but be aware that refinancing federal student loans means that you’ll lose access to federal benefits such as federal loan forgiveness and income-driven repayment plans. Clearly, it’s important to consider when to refinance student loans for the best possible outcome.
Recommended: Guide to Student Loan Refinancing
Refinancing Student Loans Without a Cosigner
Refinancing student loans without a cosigner means you’ll have full control over your loan and the responsibility of repaying it will be all yours. No one else will be financially liable for it.
However, to qualify for student loan refinancing on your own you will need to meet specific requirements. These eligibility requirements include:
Qualifying With Your Own Credit
To get approved for student loan refinancing, you typically need a good credit score and a solid credit history. FICO®, the credit scoring model, considers a good credit score to be between 670 to 739. Different lenders have different credit score requirements — some have a minimum credit score that’s slightly lower than 670 — but a higher score is usually better not only for approval but also to get the best rates and terms.
If your credit score needs some work, there are ways to build your credit over time. First, make all your payments in full and on time. Payments account for 35% of your FICO score, so this is critical. In addition, keep your credit utilization — the amount of debt you owe vs. the available credit you have — as low as you can. This can help show that you’re not overspending. And have a balanced mix of credit, such as credit cards and loans, to demonstrate that you can successfully deal with different types of debt.
In addition to your credit score, lenders will also check your credit history — meaning the age of your credit accounts. Having some older active credit accounts shows that you have a track record of borrowing money and repaying it.
Debt-to-Income Ratio
The lender will also look at your debt-to-income (DTI) ratio. This is a percentage that indicates how much of your money goes toward your monthly debts versus how much money you have coming into your household each month.
You can calculate your DTI by adding up your monthly debts and dividing that figure by your gross monthly income (your income before taxes). Multiply the resulting number by 100 to get a percentage, and that’s your DTI. The lower your DTI is, the less risk you are to lenders because it indicates that you have enough money to pay your debts, including the new loan.
If your DTI is high, above 50%, say, work on paying down the debt you owe before you apply for student loan refinancing. You can also work to boost your income by applying for a promotion or taking on a side hustle.
Employment Status
Generally, lenders look for borrowers who are currently employed and have a steady income, or, in some cases, those who have an offer of employment to start within the next 90 days, in order to approve them for student loan refinance. Check with your lender to learn their specific employment and income criteria.
Recommended: Student Loan Refinancing Calculator
Alternatives to Refinancing
If you can’t qualify for student loan refinancing without a cosigner, there are some other options to explore to help manage your student loan payments.
Income-driven Repayment Plans
With an income-driven repayment (IDR) plan, your monthly student loan payments are based on your income and family size. Your monthly payments are typically a percentage of your discretionary income, which usually means you’ll have lower payments. At the end of the repayment period, which is 20 or 25 years, depending on the IDR plan, your remaining loan balance is forgiven.
Loan Forgiveness Programs
You might qualify for student loan forgiveness through a state-specific or federal program. For instance, borrowers with federal student loans who work in public service may be eligible for the Public Service Loan Forgiveness (PSLF) program. If you work for a qualifying employer such as a not-for-profit organization or the government, PSLF may forgive the remaining balance on your eligible Direct loans after 120 qualifying payments are made under an IDR plan or the standard 10 year repayment plan. There is also a federal Teacher Loan Forgiveness program for student loan borrowers who teach in low-income schools or educational service agencies.
Be sure to check with your state to find out what loan forgiveness programs may be available. Some state programs even offer forgiveness to private student loan holders.
Federal Student Loan Consolidation
A federal Direct Consolidation loan allows you to combine all your federal loans into one new loan, which can lower your monthly payments by lengthening your loan term. The interest rate on the loan will be a weighted average of the combined interest rates of all of your consolidated loans. Consolidation can simplify and streamline your loan payments, and your loans remain federal loans with access to federal benefits and protections. However, a longer loan term means you’ll pay more in interest over the life of the loan.
How SoFi Can Help You Refinance
If you opt to refinance your student loans, you may want to consider refinancing your loans with SoFi. You’ll get competitive fixed or variable interest rates on refinanced student loans, no fees, flexible repayment options, and member benefits such as financial advice.
You can refinance online with SoFi and the process is quick and easy. You can view your rate in just two minutes, and it won’t affect your credit score. Then, you can choose a term and payment that makes sense for you. Just remember that refinancing federal student loans makes them ineligible for federal benefits such as income-driven repayment plans.
FAQS
Can I refinance my student loan without my cosigner?
If you can qualify for refinancing on your own, you typically won’t need to include the cosigner on the new loan which will have new loan terms. By qualifying on your own, you are essentially demonstrating to the lender that you have what it takes to make your loan payments. To qualify for refinancing without a cosigner, you’ll generally need a strong credit score and solid credit history, a low debt-to-income ratio, and a stable income
Is there any way to get a student loan without a cosigner?
Your ability to get a student loan without a cosigner depends on the type of loan it is and your financial situation. Most federal student loans, including Direct Subsidized and Unsubsidized loans, don’t require you to have good credit or to prove you have income, so you won’t need a cosigner for those loans. However, if you’re taking out a Direct PLUS loan and you have adverse credit, such as a recent loan default, you will likely need a cosigner for the loan.
If you’re interested in private student loans, private lenders generally have strict qualification requirements regarding your credit score and income. As a student without much of a credit history or a steady income, you may need a cosigner to qualify for a private student loan.
How easy is it to refinance student loans?
Refinancing student loans is quite easy today because in most cases you can do virtually all of it online. Here’s how: Research different lenders that offer refinancing and compare their loan terms and interest rates. Get a rate estimate from a few lenders to see what rate you may be eligible for (this process involves a soft credit check that does not affect your credit score), and then choose the lender that makes the most sense for you. You can typically complete the entire loan application online (just be aware that you will need to supply documentation to prove your financial situation).
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SoFi Student Loan Refinance
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