Student Loans: Does Using a Cosigner Help?

Some students are under impression that since they do not have an established credit history in order to get good terms and rates on student loans they have to have a cosigner. While in some cases a cosigner may be of great help, in others using a cosigner may not have a notable impact on loan terms. Before asking somebody to cosign on a student loan, one should carefully examine all available options. In certain cases, using a cosigner may not be necessary at all; in others, it could be the only way to avoid costly fees and interest charges.Explore Grant and Scholarship Opportunities FirstGrants and scholarships are great ways to fund college education, as they do not require repayment at all. Many students fail to apply for grant and scholarship programs, as they believe that such are a privilege of the brightest students. While some scholarship and grant programs are highly competitive and are designed for top performers, others do not seriously consider your past academic performance. Numerous programs are aided for students experiencing financial hardship. Others are geared towards minorities, and only require a short essay and a simple application to submit. This way or another, grants and scholarships are available to virtually every college student or student-to-be and should be seriously considered as a cost-effective way to finance higher education.See If You Qualify For Government-Backed FinancingFederal student loans, such as Stafford and Perkins loans, are excellent once it comes to borrowing for college expenses. Besides having great interest rates and convenient repayment terms such loans do not consider past credit performance of the borrower, thus eliminating the need for a cosigner. Background credit check requirement is waived, as most people who enter college do not have any credit history yet. Federal student loans come in subsidized and unsubsidized forms. Subsidized federal loans are geared towards students with the greatest financial need. The way they work is that government covers all the interest on your student loan while you attend college, making future payments more affordable. Unsubsidized loans do not share such a great feature, yet have great terms otherwise that outperform the terms of privately funded student loans.Consider a Cosigner for Private Student LoansDespite the availability of government-backed student financing, demand for private student loans is on the rise. Students who exceed allowances set by federal student aid, attendees of private trade schools and colleges, as well as foreign students who do not qualify for government student loans utilize private student loans. Unlike Stafford and Perkins loans, private student loans are credit-based. What it means to student borrowers is that their credit history affects the terms and conditions that they get. For younger students, who do not have sufficient credit history, monthly payments on private student loans could be hardly bearable, as the interest rate set by lenders is typically very high to offset potential risk of default.Private student loans are one of the few student loans where a creditworthy cosigner could be of great help. Banks are usually more lenient to applications that have an added layer of protection in form of cosigner, and are more willing to offer more relaxed terms on such loans. Therefore, use of a cosigner should be seriously considered before applying for private student loans.