Sallie Mae declined me for a student loan.

[GaTech]

So I'm 23 years old, have had a credit card since Nov 2011 (oldest tradline) and now I have 3 credit cards (see profile).

I've never missed a payment, I work part time in school (gross about 8k annually life guarding), and I pay for my own tuition.

I applied for a smart loan (without a co-signer) thinking I'd be a good candidate. They declined me with a trans FICO of 755.

They said I'd be more likely to apply with a co-signer (so I did with my dad) and they approved of my loan request ($19,040).

Do all private loans auto-decline for student loans without a co-signer? I feel this defeats the purpose since you can NEVER discharge this loans in bankruptcy court.

[drkaje]

Aren't private loans able to be included in a BK under certain circumstances?

[GaTech]

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@drkaje wrote:

Aren't private loans able to be included in a BK under certain circumstances?

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I believe its next to impossible. I think some fed loans can be forgiven if working in non-profits for 10 years (while paying off loan) or after 25 years.

With private loans, I've heard you have to show financial burden and usually the courts dont grant that.

[SCF]

It really does seem like many private lenders ask for a co-signer on student loans simply as a matter of course.  I can recall many posts here and other places with stories similar to your own OP.  Can I ask why you went with a private loan?  Had you exhausted all your options for federal loans?

Student loans, both private and federal, can be discharged in bankruptcy, but it is very rare because the standard for discharge is very high - much higher than for other types of debt.  Basically you have to prove that you will never be able to pay the loans back, and that the effort to do so would be a substantial burden.  I've read stories about people who became seriously disabled having to struggle to get their student loans discharged with the rest of their bankruptcy.

[GaTech]

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@SCF wrote:

It really does seem like many private lenders ask for a co-signer on student loans simply as a matter of course.  I can recall many posts here and other places with stories similar to your own OP.  Can I ask why you went with a private loan?  Had you exhausted all your options for federal loans?

Student loans, both private and federal, can be discharged in bankruptcy, but it is very rare because the standard for discharge is very high - much higher than for other types of debt.  Basically you have to prove that you will never be able to pay the loans back, and that the effort to do so would be a substantial burden.  I've read stories about people who became seriously disabled having to struggle to get their student loans discharged with the rest of their bankruptcy.

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Basically my parents made "too much" money based on FAFSA (which is complete bull **bleep** since my dad makes <$35000 and my mom is a single parent).

So, I'm a double major, I'm graduating with my Civil Engineering degree this spring and have 4 more semesters for my second degree. I need loans to finish my second degree.

[hilarybanks]

If you only receive support from one parent (you said your mom is a single parent), you should have just used her income. Conversely, if you only get support from your dad, you should have only used his income. When parents are separated/divorced, you don't have to use the income from both households.

Private student loans are the worst.

[Rikku]

I think that's normal. I took out several private loans in 2005, so it was a while back - but I was required to apply with a cosigner. I was a graduate student in my mid-20s with a full-time job and completely independent from my parents. My CS at the time was in the 760 range. I wasn't expecting to need a cosigner, but the rep that I spoke to at the time told me that they almost always require one.

I think the reason for it is that they're taking a chance on a student, regardless of age or CS. By definition, a student loan is for a student, who is working on his/her education and will be looking for a new job when that education is complete. Tons of students finish school and can't find a job, so it is a risky loan regardless of the borrower's CS. A 760 CS will go down the toilet very fast without any income, and that's a chance that they're taking in lending you the money. Requiring a cosigner is a protection for the lender - if the student can't find a job after graduation (or drops out), someone with an income is obligated to repay the loan.

I would not be offended - you're certainly credit worthy and as long as your DTI is reasonable, you shouldn't have a problem obtaining other types of credit on your own.

[bjremlap]

consider yourself lucky you got declined - you DO NOT want to owe ANYTHING to Sallie Mae!

In 2007 I was attending college in state, but away from home. I recieved a small federal loan each quarter, and worked part-time, but still needed a loan to cover costs. I was 19 years old, zero credit history - no credit cards, no auto loans, nothing but a checking account - and Sallie Mae approved me for a pretty significant loan - no questions asked, no co-signer required. This trend continued for 3 more years and by the time I graduated in 2010 I owed Sallie Mae close to $50,000 after all the interest piled on. Fast forward to 2011 and my grace period is up, time to start repaying the loans. I was working in retail making less than $20k per year, didn't matter - my expected payment was $800 a month - or I could pay them $150 to put the loan into forbearance for a couple months. I quickly used up my 3 allotted "free passes" and found myself back to square one, but with more interest accrued. Still couldn't make the $800 a month payment they expected - they called everyday, 8 times a day and I spent countless hours on the phone pleading with people for other repayment options to no avail so I stopped paying them all together. My account was 5 days from defaulting and FINALLY I was offered a lower payment option in their rate-reduction plan. I'm currently in my second year of the program, my accounts are current, and I'm paying them 25% of my monthly income to keep them that way. My payment is 10 times what I pay per month on my income-based federal loan plan - and they can yank this at any time. My credit is completely destroyed, I would give ANYTHING for a credit score in the 700s. You really don't know how lucky you are

[SCF]

bjremlap - your issue with Sallie Mae is more with private student loans, and taking out more money than you're able to repay.  Your story is why many of us strongly encourage people here to do whatever it takes to fund their education with a minimum amount of federal loans and avoid private ones entirely.  Private loans lack the flexibility and protections of federal loans, and a high debt burden can hang over everything you want to do after you graduate.

It sounds like you're beginning to get a handle on your situation, hopefully you'll be able to continue increasing your income and get those loans paid off!