When federal student loans fall short, many families turn to private loans to cover the gap. And private loans almost always require a cosigner -- someone with good credit and steady income who agrees to repay the loan if the student cannot. For most families, the first choice is a parent. But what if a grandparent has stronger finances, or a parent's credit is not ideal? Choosing the right cosigner matters more than you might think. It affects approval odds, interest rates, financial aid, and family relationships. This guide breaks down the real differences between asking a parent and asking a grandparent to cosign a private student loan.
Why Private Loans Need a Cosigner
Most undergraduate students do not have enough credit history or income to qualify for a private loan on their own. According to Sallie Mae's "How America Pays for College" 2025 report, families borrowed an average of $10,572 in student loans for the 2024-25 academic year. A large share of private loan applications include a cosigner -- some lenders report that over 90% of undergraduate private loans involve one.
A cosigner's credit score and income directly affect:
- Whether you get approved at all. Lenders want to see a FICO score of at least 670, though 720 or higher usually gets the best rates.
- The interest rate you receive. A cosigner with an 800 credit score might lock in a rate 2-4 percentage points lower than a cosigner with a 680 score. On a $30,000 loan over 10 years, that difference can mean saving $4,000-$8,000 in interest.
- The loan amount you qualify for. Higher income and lower existing debt let lenders approve larger amounts.
Parent as Cosigner: The Common Path
Advantages
Parents are the most common cosigners for a reason. They are typically in their peak earning years (ages 40-55), which means higher income and a longer credit history. Lenders like to see:
- A stable employment record
- A debt-to-income (DTI) ratio below 40-45%
- A credit history of 10 or more years
A parent cosigner also keeps things simple for FAFSA reporting. Since FAFSA already counts parent income and assets when calculating the Student Aid Index (SAI), a parent cosigning a private loan does not add any new financial information into the equation. The loan itself is not reported as income on FAFSA, so it does not change your aid eligibility.
Challenges
The biggest risk for a parent cosigner is the impact on their own finances:
- Credit report impact. The full loan balance shows up on the parent's credit report. If the student misses a payment, the parent's credit score drops too.
- DTI ratio goes up. The monthly loan payment counts as the parent's debt. This can make it harder for the parent to qualify for a mortgage, car loan, or refinance. For example, if a parent earns $6,000 per month and already has $1,800 in monthly debt payments, adding a $300 student loan payment pushes their DTI from 30% to 35%.
- Multiple children. If the parent cosigns for more than one child, debt stacks up quickly. Three loans of $25,000 each means $75,000 added to the parent's credit profile.
Grandparent as Cosigner: A Less Obvious Option
Rankings
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Compare College Ave, Earnest, and Sallie Mae — with Sallie's rate matched to this program where available.
- Rank #1Editor's Pick
Parent
College Ave
Best for: Students who want flexible repayment options and no origination fees
- 0.25% rate reduction with auto-pay
- Four in-school repayment options
- No application, origination, or prepayment fees
- Borrow from $1,000 up to 100% of cost of attendance
Apply NowRates
Lowest Rate 1.94%
1.94% - 17.99% fixed APR, 3.89% - 17.99% variable APR
Disclosures+
College Ave's student loan products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or BTG Pactual Bank, N.A., member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1) All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2) As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3) This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (APR): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 8/18/2026. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
- Rank #2
Parent
Sallie Mae
Best for: Undergraduate and graduate students, and parents, comparing competitive fixed- and variable-rate private student loans
- Competitive variable and fixed rates
- Multiple repayment options
- Cosigner release available
- No origination fees
Apply NowRates
Lowest Rate 1.95%
1.95% - 17.49% fixed APR, 3.75% - 16.95% variable APR
Disclosures+
Undergraduate School Loan/Smart Option Student Loan: Examples of typical transactions for a $10,000 Smart Option Student Loan with the most common fixed rate, Fixed Repayment Option, two disbursements, a 4-year in-school period, and a 6-month grace: For a borrower with the shortest loan term, it works out to 16.16% fixed APR, 51 payments of $25.00, 119 payments of $296.32 and one payment of $41.82, for a total loan cost of $36,578.90. For a borrower with the longest loan term, it works out to 16.38% fixed APR, 51 payments of $25.00, 177 payments of $265.54 and one payment of $173.00, for a total loan cost of $48,448.58. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not. Information advertised valid as of 08/25/2026. Rates: Advertised APRs for undergraduate students assume a $10,000 loan with a 4-year in-school period, a 6-month grace, and the longest loan term offered. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan's Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Cosigner Release: Only the borrower may apply for cosigner release. To do so, they must first meet the age of majority in their state and provide proof of graduation (or completion of certification program), income, and U.S. citizenship or permanent residency (if their status has changed since they applied). In the last 12 months, the borrower can't have been past due on any loans serviced by Sallie Mae for 30 or more days or enrolled in any hardship forbearances or modified repayment programs. In addition, the borrower must have paid ahead or made 12 on-time principal and interest payments on each loan requested for release. The loan can't be past due when the cosigner release application is processed. The borrower must also demonstrate the ability to assume full responsibility of the loan(s) individually and pass a credit review when the cosigner release application is processed that demonstrates a satisfactory credit history including but not limited to no: bankruptcy, foreclosure, student loan(s) in default or 90-day delinquencies in the last 24 months. Requirements are subject to change.
- Rank #3
Parent
Earnest
Best for: Borrowers who want a zero-fee¹ lender with flexible repayment options² across undergrad, grad, and professional school programs
- 0.25% Auto Pay³ discount plus 0.25% Loyalty⁴ discount for eligible returning borrowers
- No origination fees, late fees, or prepayment penalties¹
- Borrow $1,000⁵ to $400,000 with 5, 7, 10, 12, or 15-year terms⁶
- Four repayment options², a 9-month grace period⁷, and cosigner release for eligible borrowers⁸
Check EligibilityRates
Lowest Rate 2.29%
2.29% - 16.24% fixed APR, 4.74% - 16.60% variable APR
Disclosures+
Earnest Private Student Loans are subject to credit approval. ¹Earnest does not charge fees for origination, late payments, returned check, or prepayments. Florida Stamp Tax: For Florida residents, Florida documentary stamp tax is required by law, calculated as $0.35 for each $100 (or portion thereof) of the principal loan amount, the amount of which is provided in the Final Disclosure. Lender will add the stamp tax to the principal loan amount. The full amount will be paid directly to the Florida Department of Revenue. Certificate of Registration No. 78-8016373916-1. ²Repayment terms and repayment options available vary based on loan type. ³You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. It is important to note that the 0.25% Auto Pay discount is not available when loan payments are deferred during the interim period as a result of selecting the deferred repayment option. ⁴To be eligible for the Loyalty Discount, applicants must have previously obtained an Earnest Private Student Loan and apply using the same email address associated with that loan. Only one Loyalty Discount may be applied per eligible Earnest Private Student Loan. Not all applicants may qualify. This offer cannot be combined with Earnest’s Rate Match program. Earnest may modify or discontinue this offer at any time and without notice, however, once a Loyalty Discount is earned, it will not be taken away. ⁵Residents of Hawaii must request a loan of at least $1,501. ⁶Available interest rates are subject to change. Interest rates as of 03/19/2026. Earnest’s Loan Cost Examples: 1.) These examples provide estimates based on principal and interest payments beginning immediately upon loan disbursement. Variable annual percentage rate ("APR"): A $10,000 loan with a 15-year term (180 monthly payments of $152.84) and a 16.85% interest rate without Auto Pay (16.85% APR) would result in a total estimated payment amount of $27,511.20. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 15-year term (180 monthly payments of $150.30) and a 16.49% interest rate without Auto Pay (16.49% APR) would result in a total estimated payment amount of $27,054.10. 2.) These examples provide estimates based on interest-only payments while in school. Variable interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $152.84) and a 16.85% interest rate without Auto Pay (16.85% APR) would result in a total estimated payment amount of $35,515.14. For a variable loan, after your starting rate is set, your rate will then vary with the market. Your actual repayment terms may vary. Other repayment options are available. The calculation assumes that the “in-school” period is 4 years (48 months) and includes our 9 month grace period, during which the monthly payment will be $140.42 for 57 months. Fixed interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $150.30) and a 16.49% interest rate without Auto Pay (16.49% APR) would result in a total estimated payment amount of $34,886.94. Your actual repayment terms may vary. Other repayment options are available. The calculation assumes that the “in-school” period is 4 years (48 months) and includes our 9 month grace period, during which the monthly payment will be $137.42 for 57 months. 3.) These examples provide estimates based on fixed $25 payments while in school. Variable interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $253.39) and a 16.85% interest rate without Auto Pay (14.92% APR) would result in a total estimated payment amount of $47,035.20. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $246.61) and a 16.49% interest rate without Auto Pay (14.65% APR) would result in a total estimated payment amount of $45,814.80. Your actual repayment terms may vary. Other repayment options are available. The calculation assumes that the “in-school” period is 4 years (48 months) and includes our 9 month grace period, during which the monthly payment will be $25.00. 4.) These examples provide estimates based on deferred payments. Variable interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $275.17) and a 16.85% interest rate without Auto Pay (14.67% APR) would result in a total estimated payment amount of $49,530.60. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed interest rate: A $10,000 loan with a 15-year term (180 monthly payments of $268.03) and a 16.49% interest rate without Auto Pay (14.39% APR) would result in a total estimated payment amount of $48,245.40. Your actual repayment terms may vary. Other repayment options are available. It is important to note that the 0.25% Auto Pay discount is not available when the deferred repayment option has been selected and the loan is in the interim period. The calculation assumes that the “in-school” period is 4 years (48 months) and includes our 9 month grace period, during which the monthly payment will be $0. ⁷Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school. ⁸To qualify for automatic cosigner release, the outstanding principal balance of your loan must be paid down to 50% or less of the original principal balance. The primary borrower must have made 36 months of required payments after the end of the Interim Period. The primary borrower must meet our eligibility and minimum credit requirements. Additional terms and conditions may apply. To request cosigner release, the primary borrower must have made 12 consecutive, monthly on-time principal and interest payments (or an amount equal thereto) immediately preceding the cosigner release application. The primary borrower must satisfy certain eligibility and credit criteria at the time of application. Additional terms and conditions may apply. ⁹Includes 0.50% combined Auto Pay and Loyalty discounts. Actual rate and available repayment terms will vary based on your financial profile. Fixed annual percentage rates (APR) range from 2.79% to 16.74% (2.29% - 16.24% with Auto Pay and Loyalty discounts). Variable annual percentage rates (APR) range from 5.24% to 17.1% (4.74% - 16.6% with Auto Pay and Loyalty discounts). Earnest variable interest rate student loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent plus a margin and will change on the 1st of each month. The rate will not increase more than once a month, but there is no limit on the amount that the rate could increase at one time. Our lowest rates are only available for our most credit qualified existing cosigned loan borrowers who receive the 0.25% Loyalty discount and requires selection of our shortest term offered, full principal and interest payment while in school, and enrollment in our 0.25% Auto Pay discount. Enrolling in Auto Pay is not required as a condition for approval. Interest rates are subject to change. Earnest Private Student Loans are made by FinWise Bank, Member FDIC. FinWise Bank, 756 East Winchester, Suite 100, Murray, UT 84107. Earnest student loans are serviced by Earnest Operations LLC, 300 Frank H. Ogawa Plaza, Suite 340, Oakland, CA 94612. NMLS #1204917, with support from Higher Education Loan Authority of the State of Missouri (MOHELA) (NMLS# 1442770). FinWise Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America. © 2026 Earnest LLC. All rights reserved.
Advantages
Grandparents can be excellent cosigners. Many retirees or near-retirees have:
- High credit scores. The average FICO score for Americans aged 60 and older is above 740, compared to about 680 for those aged 40-49.
- Low existing debt. If the mortgage is paid off and there are no car payments, a grandparent's DTI ratio may be very low.
- Significant assets. Savings, retirement accounts, and home equity can reassure lenders even if monthly income looks smaller.
A grandparent cosigner can also protect the parent's borrowing power. If your family is planning to buy a home, refinance, or take on other debt in the next few years, keeping the student loan off the parent's credit report is a real advantage.
Challenges
There are some real challenges when a grandparent cosigns:
- Age limits from lenders. Some private lenders have maximum age requirements for cosigners. While many major lenders like Sallie Mae, Earnest, and College Ave do not publish a hard age cap, others may decline applicants who would be over 75 or 80 by the end of the loan term. A 10-year repayment period starting when the grandparent is 72 means the loan would not be paid off until age 82. Always ask the lender directly about age policies before applying.
- Fixed income concerns. Lenders look at income, and Social Security plus a pension may not meet minimum income thresholds. Some lenders require a minimum annual income of $24,000-$40,000 for cosigners. If the grandparent's income is mostly from Social Security (the average monthly benefit in 2025 is about $1,976, or roughly $23,700 per year), they may fall short of some lender requirements.
- Health and life considerations. If a grandparent cosigner passes away during the loan term, some lenders may call the loan due immediately -- a clause known as "auto-default." Not all lenders do this, but it is important to read the fine print. The Consumer Financial Protection Bureau (CFPB) has flagged this issue. Ask the lender: "What happens to the loan if my cosigner dies?"
How Each Choice Affects FAFSA and Financial Aid
This is where things get interesting -- and where many families make mistakes.
Parent Cosigner and FAFSA
A parent cosigning a private loan has no direct effect on your FAFSA. The loan does not count as income. It does not count as a parent asset. FAFSA does not even ask about private loan balances. The parent's income and assets are already reported on FAFSA regardless of whether they cosign a loan.
Grandparent Cosigner and FAFSA
A grandparent cosigning also has no direct effect on FAFSA. The loan does not count as income for the student or the parent. Cosigning is not the same as giving money -- it is a promise to repay if the borrower defaults.
But Watch Out: Grandparent 529 Plans vs. Cosigning
Here is where families sometimes mix up two very different things. Before the FAFSA Simplification Act changes that took effect for the 2024-25 award year, distributions from a grandparent-owned 529 plan counted as untaxed student income on FAFSA. That could reduce aid by up to 50% of the distribution amount.
Good news: Under the current FAFSA rules (2025-26 academic year), grandparent-owned 529 distributions are no longer reported on FAFSA. The form no longer asks about cash support or money from non-custodial relatives. This means a grandparent can both contribute to a 529 and cosign a loan without any negative FAFSA impact.
However, keep in mind:
- If the grandparent is giving the student cash to make loan payments (not cosigning), that gift could affect CSS Profile schools. About 200 colleges use the CSS Profile, which may still ask about outside support.
- Cosigning is different from paying. If the grandparent makes actual payments on the loan, some schools might consider that support on the CSS Profile. Cosigning by itself -- just being the backup borrower -- is not reported.
Cosigner Release: When Can the Cosigner Get Off the Hook?
Most private lenders offer a cosigner release option after the borrower makes a certain number of on-time payments and meets credit and income requirements on their own. Here is what to expect:
- Typical timeline: 12 to 48 consecutive on-time payments, depending on the lender. Sallie Mae requires 12 months. Others like Discover or Citizens require 24-48 months.
- Credit requirements for release: The borrower usually needs a credit score of 670 or higher and enough income to cover the payments independently.
- Not guaranteed. Lenders can deny a cosigner release if the borrower's credit or income does not meet the threshold at the time of the request.
Cosigner release matters more for grandparent cosigners because of age. If your grandparent is 70 when they cosign, even a 12-month release timeline means they carry the risk for at least a year. A 48-month requirement means they would be 74 before they could be released -- and that assumes you qualify.
Tip: Compare cosigner release policies before choosing a lender. This should be a top factor in your decision.
Lender Policies: What to Ask Before Applying
Not every lender treats parent and grandparent cosigners the same. Here is a checklist of questions to ask:
- Is there a maximum cosigner age? Some lenders cap at age 70 or require the cosigner to be under a certain age at the end of the loan term.
- What income types count? Pension, Social Security, investment income, and rental income may or may not count. Ask specifically.
- What is the minimum income requirement? This varies from $24,000 to $40,000 or more per year.
- What is the auto-default policy? Find out what happens if the cosigner dies or goes bankrupt during the repayment period.
- What are the cosigner release requirements? Get the number of required payments, minimum credit score, and minimum income in writing.
- Does the lender do a hard or soft credit pull for prequalification? A soft pull lets your grandparent check eligibility without affecting their credit score.
Having the Conversation With Your Family
Asking someone to cosign a loan is a big ask. You are asking them to take on financial risk for years. Here is how to approach it honestly:
If You Are the Student
- Do your homework first. Know the loan amount, estimated monthly payment, interest rate range, and repayment timeline before you ask.
- Be clear about the risk. Say something like: "If I cannot make payments, you would be responsible. I want to be upfront about that."
- Share your plan. Explain your major, expected salary after graduation, and how you plan to handle payments. The Bureau of Labor Statistics has salary data by career field that you can reference.
- Discuss cosigner release. Let them know you plan to release them as soon as you qualify.
If You Are the Parent Considering Asking Your Own Parent
- Respect their retirement. Do not pressure them. A grandparent on a fixed income may feel obligated but unable to say no.
- Consider alternatives first. Could the parent cosign instead? Could the student borrow less? Could you combine a smaller private loan with work-study or scholarships?
- Put it in writing. Even within families, having a simple written agreement about who makes payments and what happens if someone cannot pay prevents misunderstandings later.
A Middle Ground: Splitting the Approach
Some families use a combined strategy:
- The parent cosigns for the first year or two while the grandparent helps with direct support (like 529 contributions or paying for books and housing).
- The student works toward building credit independently so they can refinance without a cosigner after graduation.
- The family revisits the plan each year as circumstances change.
Roadblocks to Watch
- Applying with multiple cosigners at different lenders. Each hard credit inquiry can temporarily lower the cosigner's score by 5-10 points. Space out applications or use lenders that offer soft-pull prequalification.
- Assuming retirement income will be enough. Social Security alone may not meet income requirements. Have the grandparent gather documentation of all income sources -- pension statements, investment account statements, rental income records -- before applying.
- Ignoring the estate plan. If a grandparent cosigner passes away, the loan does not disappear. It becomes a claim against the estate or triggers auto-default. Make sure the family's estate planning accounts for this possibility.
- Forgetting about taxes. If a grandparent makes loan payments on the student's behalf, the IRS may consider those payments a gift. In 2025, the annual gift tax exclusion is $18,000 per recipient. Payments above that amount may require filing a gift tax return (though most people will not owe actual gift tax due to the lifetime exemption).
The Bottom Line
There is no single right answer for every family. A parent cosigner is the simpler, more common choice -- and it keeps FAFSA reporting clean. A grandparent cosigner can be a smart option when the parent's credit is stretched, the grandparent has strong finances, and the family understands the age-related risks.
The best approach is to compare both options side by side. Check credit scores, calculate DTI ratios, and research lender requirements before anyone fills out an application. Talk openly about the risks. And remember: the goal is not just to get the loan approved. The goal is to get through repayment without damaging anyone's financial health or family relationships.
Before you commit to any private loan, make sure you have explored every source of aid available to you. Run a personalized college cost plan at CollegeLens to see your full financial picture -- including grants, scholarships, federal loans, and how much (if any) private borrowing you actually need. The less you borrow, the less any cosigner has to worry about.
Sravani at CollegeLens
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