With more students being encouraged to obtain a college education despite the soaring costs involved, there are plenty of initiatives to make securing a student loan easy for most applicants. Having a low income is no impediment to a college education though the prohibitive costs involved in repaying student loans should make students consider if the amount of debt they will accrue is going to be worthwhile. The current average debt upon graduation is $17,000 which is a huge amount to start out owing.
Anyone needing a student loan must first complete the FAFSA application which offers access to both subsidized and unsubsidized student loans. These offer fixed rate borrowing on preferential rates and are cheaper to service than private student loans. Applications should be made early to FAFSA as there will generally still be a shortfall between federal loans and grants, and the funds necessary to pursue a degree.
Parents with good credit are also able to obtain federal loans in their own names on behalf of the student, but these are non transferrable and will remain the responsibility of the parent for their duration.
Private student loans should remain the last choice for students as they are far more expensive to service than federal loans. Ironically whilst the lenders want the custom of students who are likely to go on to become good earners, they are reluctant to lend directly to a student with no credit history, even though the loans are legally non dischargeable. Private lenders want the security of a co-signer on a student application as students rarely have a credit history of their own and thus present as an unknown risk.
If you are planning ahead and not looking for an immediate student loan the best thing you can do is establish your own credit history. If the student is too young to obtain credit in their own name then at least they should establish a bank account which is used responsibly, and apply for a secured credit card to demonstrate fiscal soundness. If time allows it is possible to establish a credit history which would mean reliance on a co-signer may not be necessary as not everyone has access to a person either willing, or with a suitable credit history, to stand as guarantor.
Those who are not fresh from school and wanting to return to education will more likely fit the criterion of obtaining a private student loan without relying on a co signer if they already have an established credit history and may be in a position to offer some form of security. Younger students who have no one to co-sign a private loan must consider attending college on federal grants and working at the same time to finance their way. They may then be in a position in a later term of college to obtain a private loan by having then established a credit history.
Student loans do remain relatively easy to acquire and some would argue too easy, as many students fail to appreciate the amount of debt they will be graduating with until they are suddenly faced with the reality of repayments. The best advice is to obtain as much as you can through scholarships, grants, and federal loans or other viable options such as sponsorship by an employer, and limit dependence on private loans to the absolute minimum.