Personal Loans When You Are a College Student

Old enough to sign the contract

A loan is a contract, so you must have reached your state's age of majority. Cornell's Legal Information Institute notes that most states set it at 18, with Alabama and Nebraska at 19 and Mississippi at 21. A lender in those states may ask a younger applicant for a cosigner, or decline.

Once you can contract, the Equal Credit Opportunity Act treats age as a prohibited basis for a credit decision. A lender may not turn you down simply because you are 19, though it can weigh things that often come with youth, such as a short credit history or a short time at your job.

What a lender checks on a student application

• Income you can document: pay stubs from a campus or part-time job, 1099 forms from freelance or gig work, and bank statements that show the deposits.
• Credit history: a short file, or none, often means a higher rate or a request for a cosigner. Check yours first with check your credit first.
• Debts and payments: card balances and any student loans already in repayment count against what you can afford.
• Identity and address: a government photo ID and proof of where you live, such as a lease or a bank statement mailed to you.

Regulation B, 12 CFR 1002.6(b)(5), says a lender may not discount or exclude income because it comes from part-time work. It may still judge how much you earn and whether the job is likely to continue, so a summer job that ends in August will count for less than steady hours through the school year.

Ask the financial aid office before a lender

Federal law lets a school's financial aid administrator adjust your aid on a case-by-case basis when special circumstances set you apart from other students, as long as you can document them. The statute, 20 U.S.C. 1087tt, gives examples such as a recent job loss in your family or your own, unreimbursed medical or dental costs, dependent care costs and changes in income.

1. 1 Write down the change and gather proof: a layoff letter, medical bills, a new lease.
2. 2 Ask the aid office for a special-circumstances review. Schools may not charge a fee to review it.
3. 3 Ask about short-term help. Find out whether the school offers emergency grants or small emergency loans, and on what terms.
4. 4 Only then compare outside loans for whatever gap remains.

A federal credit union you can join is another place to ask. It may offer a small payday alternative loan of up to $2,000, with an application fee capped at $20, though the first type of these loans requires to have joined at least one month before you apply.

The Credit CARD Act applies to cards, not loans

You may have heard that people under 21 need their own income or a cosigner to get credit. That rule comes from the Credit CARD Act and sits in Regulation Z at 12 CFR 1026.51(b). It covers credit card accounts only. A card issuer must see that an applicant under 21 can make the minimum payments alone, or get a signed agreement from a cosigner or joint applicant who is at least 21 and can pay.

A personal installment loan is not a card account, so that section does not govern it. Each lender sets its own standards for young applicants, within ECOA and your state's lending law. See what your state lets a licensed lender charge.

What a cosigner agrees to

A cosigner can turn a declined application into an offer or lower its rate. The worked example below shows how much a lower rate can matter. The rates are illustrations, not quotes.

The price of that saving falls on the cosigner. The Federal Trade Commission's Credit Practices Rule, 16 CFR 444.3, makes it an unfair practice for a lender to obligate a cosigner without first handing over a separate Notice to Cosigner. In plain terms, that notice warns that:

• if you do not pay, the cosigner will have to, including late fees and collection costs;
• the lender can collect from the cosigner without first trying to collect from you;
• a default can appear on the cosigner's credit record.

Before anyone signs, agree how you will handle a missed payment, and read the late fee terms together.

What to compare before you accept

Students often see one offer and take it. Collect at least two, ideally including a credit union, and read the same lines on each Truth in Lending disclosure:

• APR, which folds any origination fee into the yearly rate. Compare it only between loans of the same length.
• Amount financed, the money you actually receive after a fee is taken out.
• Monthly payment against your term calendar. A payment that fits during a semester with work hours may not fit during finals or a summer without a job.
• Late fee and grace period, which matter to you and to any cosigner.

The offer comparison calculator lines up two or three offers side by side.

Questions people ask