Big Discrepancy Between Applied Income/Credit Score & Approved Income/Credit Score
Because cosigners are usually older and more established in their careers, they usually have a stronger credit score and higher income than college students that are applying for private student loans by themselves.
Take a look at applied credit scores versus approved credit scores for private student loan applications:
There’s a difference of more than 100 points between the credit score of all private student loan applicants and the credit score of approved applicants. It is highly likely that most of the approved applicants applied with a cosigner.
The trend from the LendEDU data was no different when evaluating applied versus approved income:
Once again, it’s probable that the vast majority of approved private student loan applicants had a cosigner with them that had a much higher income to record on that application.
One last piece of data from the LendEDU report looked at the average private student loan amount.
Average Private Student Loan Amount Hits 5-Year Low
In 2020, LendEDU found that the average funded private student loan amount was $11,279, which represents a five-year low from when LendEDU first began doing this report in 2016.
This could possibly pertain to the current economic recession we find ourselves in due to the coronavirus pandemic. With much uncertainty in the personal finance world, lenders could be cutting back on their loan sizes because they are unsure if current borrowers in repayment have the ability to repay their loans and balance the books.
With that being said, the private student loan industry will continue to flourish in the years to come so long as the cost of college continues to increase at a rapid rate.
Tips for College Students Thinking About Private Student Loans
If a college student is trying to figure out how to finance their education, here are a few tips to consider when exploring private student loans.
Exhaust All Other Options First
Private student loan interest rates are usually much higher than federal student loan rates and thus more difficult to repay upon graduation. Because of this, college students should only consider private student loans if they have first exhausted all other options including scholarships, grants, work-study programs, and federal student loans.
Compare the Options
If a student has no other choice but to turn to the private student loan market, the most important thing to do is compare the many private student loan lenders out there and what kind of terms they can offer. Only by shopping all of the various lenders and interest rates will a student feel comfortable in knowing they are hopefully receiving a decent deal.
Apply With a Cosigner
If the data from LendEDU’s private student loan report is any indicator, applying for private student loans with a cosigner will give any college student the best possible chance of getting approved and receiving a lower interest rate.
Author Bio: In his role as Director of Communications at LendEDU, Mike uses data, usually from surveys and publicly-available resources, to identify emerging personal finance trends and tell unique stories. Mike’s work, featured in major outlets like The Wall Street Journal and The Washington Post, provides consumers with a personal finance measuring stick and can help them make informed finance decisions.