What to do if you are denied a student loan with a co-signer


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If you are about to go to college or university, but you have been refused a student loan (even with a co-signer), that does not mean that you have no more options for pay for your studies.

Here’s what to do if you’re denied a student loan with a co-signer (or without):

What to do if you have been refused a student loan

Private student loan lenders can refuse applications for a variety of reasons, including credit and other financial issues. If you have applied for a loan on your own and your application has been refused, you still have several ways to go.

Here are the possible next steps:

  • Complete the FAFSA: The Free Application for Federal Student Aid (FAFSA) is used to apply for federal student assistance, including federal student loans which, unlike private loans, do not require a credit check. It’s worth completing the FAFSA even if you don’t think you qualify for student loans, as you may be eligible for other aids such as grants or scholarships.
  • Improve your credit: Your credit is an important part of eligibility for private student loans. If you work to increase your credit score, you can improve your chances of being approved on a future application. The most important factors that make up your credit score are making payments on time and keeping your revolving account balances low (like credit card balances).
  • Find a co-signer: If you are applying for a private student loan with a creditworthy co-signer, their good credit could help you get approved. Having a co-signer can also mean qualifying for better loan terms (like a lower interest rate). But keep in mind that this also means that the co-signer is responsible for repaying the loan if you stop making payments.
  • Find scholarships and grants: There are countless college scholarships and subsidies available to undergraduate and graduate students. These are basically free school money that you don’t have to pay back, so it’s worth taking the time to apply for as much as you might qualify.

If in doubt, speak to your school’s financial aid office to learn more about your options. They might even have connections to find you a part-time job on campus or find out about scholarships you might not have found elsewhere.

Learn more: How to find a co-signer

What to do if you have been refused a student loan (with a co-signer)

It can seem like a double whammy if you’re turned down for a student loan with a co-signer. But all hope is not lost.

Here are some strategies that might help you get this loan:

  • Encourage your co-signer to check their credit: Sometimes credit reports contain errors, which means that your cosigner credit score may not be correct. If your co-signer finds errors and files a case, their score could increase.
  • Find a new co-signer: If your first co-signer fails, try again. Consider asking a trusted relative or friend to co-sign your loan. Keep in mind that co-signing can be a risk, so you might not get an enthusiastic response.
  • Build your own credit: It takes time to create or repair credit, so it’s not a quick fix. But if you run out of other financing options, working on your own credit might be your best bet. For example, you can open a credit card (if you don’t already have one) and make on-time payments every month while keeping your balance low (or better yet, paid off every month) to build up a history of positive credit.

If your loved ones or other trusted friends have poor credit histories, your options for securing a private student loan with a co-signer may be limited. In that case, federal or other needs-based student aid might be your best financial resource. Contact your school’s financial aid office if you are unsure of what to do next.

Learn more: How to pay for college

Most students use a co-signer to get a private student loan

Most private student loans have a co-signer – so if you need one, you’re not alone.

How does a lender decide who qualifies for a private student loan? When reviewing loan applications, lenders typically look at a range of factors in making a decision. The most important of these are usually your credit score, income, and other debt payments for which you are responsible. Having a co-signer can facilitate your qualification.

If you are looking for a private student loan, be sure to consider as many lenders as possible to find the loan that’s right for you. Credible makes it easy for you: you can see your rates in two minutes after filling out a single form.

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Checking rates will not affect your credit

About the Author

Eric Rosenberg

Eric Rosenberg is an expert in personal finance. His work has been featured in Business Insider, Investopedia, The Balance, The Huffington Post, MSN Money, Yahoo Finance, Mint.com and more.

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