What to Know About Co-Signing a Student Loan
Just like any other type of loan, there may be a need for a co-signer for a student loan as well.
Having someone co-sign a student loan may allow the student to borrow at a lower interest, as long as the co-signer has good credit. But before you ask a loved one if they would co-sign for your loan, the Consumer Financial Protection Burea recommends that you consider some of the risks and obligations that come with that request.
You and your co-signer are equally responsible and legally obligated to repay the loan. If you are going to be the co-signer, you should consider whether the student will be able to repay back the loan on time and if not, are you able to absorb that debt as well?
Any late or missed payments will affect both the co-signer and the student’s credit history. As a co-signer you should decide before signing for the loan how far you are willing to possibly risk the harm of your credit score and history, should the student not make any payments on the loan.
Often private lenders will hire a collection agency to try and get the co-signer to repay the loan amount back. As a co-signer, you open yourself up to civil litigation (lawsuits) as much as the borrower is as well.
Related: How to Choose Financial Aid
There is some good news for the co-signer. In some situations, the private lender may offer to release your obligation to the loan you co-signed for. This sometimes happened if the student makes a certain number of payments on time and/or meets other certain credit requirements.
More Content Like This