How to Pick a Good Student Loan Co-Borrower

When delving into the world of private student loans, you may discover that many lenders mention a “co-borrower.” A co-borrower is someone who applies for the loan with you and is equally responsible for ensuring it is repaid. A private student loan will be held in your name as the primary borrower, but the co-borrower’s name and credit will be tied to the loan as well.

Why do you need a co-borrower?

Most high school and college-aged students have not yet built a good credit history, meaning lending to them is a bigger risk for financial institutions. They can’t look at your credit and payment history to be assured you will repay the loan. By applying with a co-borrower, you may have a better chance of being approved for a loan, and you may receive a lower interest rate.

Characteristics of a good co-borrower

First and foremost, a co-borrower needs to have established – and good – credit. They also will need proof of a stable income, and a low amount of debt.

Your co-borrower needs to be aware that they are as legally responsible for making payments toward your student loan as you are. As the name indicates, they are borrowing the funds alongside you and sharing the same debt. Just as a couple shares a mortgage for their home, your co-borrower will hold the student loan with you.

What’s the difference between a co-borrower vs a co-signer?

You may come across the option to select a student loan co-signer rather than a co-borrower. Most often, a loan cosigner is required when the person applying for a private student loan doesn’t have the credit history to qualify for it on their own. The co-signer does not share the loan and debt repayment as a co-borrower does. However, the co-signer agrees to take responsibility that the loan will be repaid, and will step in and cover payments if the borrower is unable to afford them.

Who can be a co-borrower on a student loan?

Parents are the most common co-borrowers on a student loan, but there may be reasons a parent isn’t the best (or available) choice. They may not be involved in a student’s life, or they may not have a strong enough credit history. Essentially anyone can be a co-borrower – a grandparent, another family member, or even a mentor or family friend, so long as they meet the criteria above.

If you are looking for a private student loan to help cover costs once you’ve exhausted options for scholarships, grants, and federal student loans, USC Credit Union has your back! Learn more about our private education line of credit to make sure your costs are covered for fall semester. Keep in mind, 97% of our approved applications have a co-borrower.

If you have additional questions about paying for college, consult our College Counselor, who provides free, personalized guidance on paying for college and navigating your options.