Think Twice Before Co-Signing For A Student Loan


In a recent survey of college pricing, the College Board found that a “moderate” college budget for an in-state public college averaged $23,410 for the 2014–2015 academic year. A moderate budget at a private college averaged $46,272. The high cost of college is resulting in many parents and other family members co-signing for a student loan to help the student get the funding that they need. There are a number of things that you should keep in mind before deciding to co-sign for a student loan.

You May Become Responsible For The Payments

Becoming a co-signer means taking responsibility for the payment of the student loan. If the borrower is unable to make payments on the student loan for any reason, the task falls onto your shoulders. If you do not make the payments, it will be reflected on your credit history, will damage your credit score, and debt collectors may come after you.

Student Loans Cannot Be Discharged In Bankruptcy

There are very few legal options available for getting out from under onerous student loan debt. Bankruptcy laws prohibit the modification of student loans by the court. In some cases, the loan payments can be delayed for a period of time, but the total amount will still be due to the lender once that time period ends.

Being Removed As A Co-Signer Is Difficult

About 90 percent of borrowers who request to have their co-signers released from their obligation are rejected. In many cases, it is difficult to even obtain information about the process for securing a co-signer’s release from a private student loan. Even though private lending companies advertise the ability to release a co-signer from the loan at a later date, review all of the information in the loan documents carefully to ensure there is actually a mechanism in place for removing a co-signer from the loan.

Co-Signer Actions Can Put The Loan In Default

If a co-signer dies or files for bankruptcy protection, there is a chance that the student loan will be automatically placed in default, or become due in full, regardless of the payment history on the loan. Primary borrowers have been surprised to find these types of actions taken against their accounts even though they are current on the payments for the loan. Such “automatic defaults” are common when loans are sold or securitized and are handled by a new servicer.

These difficulties should make you think twice about co-signing for a student loan. Government student loans rarely require a co-signer and have various payment protections in place, so a student should secure as much money in government loans as they can before turning to private loans. Students should also consider attending a college with lower tuition costs if they are having difficulty obtaining student loans on their own without a co-signer.

Join our newsletter


Subscribe to get the latest "Engineer Your Finances" content via email.

Powered by ConvertKit
About the author

Join our newsletter

Subscribe to get the latest "Engineer Your Finances" content via email.

Powered by ConvertKit Top Finance Blogs


SSCP   CAS-002   9L0-066   350-050   642-999   220-801   74-678   642-732   400-051   ICGB   c2010-652   70-413   101-400   220-902   350-080   210-260   70-246   1Z0-144   3002   AWS-SYSOPS   70-347   PEGACPBA71V1   220-901   70-534   LX0-104   070-461   HP0-S42   1Z0-061   000-105   70-486   70-177   N10-006   500-260   640-692   70-980   CISM   VCP550   70-532   200-101   000-080   PR000041   2V0-621   70-411   352-001   70-480   70-461   ICBB   000-089   70-410   350-029   1Z0-060   2V0-620   210-065   70-463   70-483   CRISC   MB6-703   1z0-808   220-802   ITILFND   1Z0-804   LX0-103   MB2-704   210-060   101   200-310   640-911   200-120   EX300   300-209   1Z0-803   350-001   400-201   9L0-012   70-488   JN0-102   640-916   70-270   100-101   MB5-705   JK0-022   350-060   300-320   1z0-434   350-018   400-101   350-030   000-106   ADM-201   300-135   300-208   EX200   PMP   NSE4   1Z0-051   c2010-657   C_TFIN52_66   300-115   70-417   9A0-385   70-243   300-075   70-487   NS0-157   MB2-707   70-533   CAP   OG0-093   M70-101   300-070   102-400   JN0-360   SY0-401   000-017   300-206   CCA-500   70-412   2V0-621D   70-178   810-403   70-462   OG0-091   1V0-601   200-355   000-104   700-501   70-346   CISSP   300-101   1Y0-201   200-125  , 200-125  , 100-105  , 100-105  , 1Z0-803  , 400-051   EX300  , CISM   100-105  , 000-106   400-201   642-732   220-902   70-410  , MB6-703   810-403   70-243  , CAS-002  , AWS-SYSOPS   70-462   70-410   2V0-621   LX0-103   70-461  , 220-902   1Z0-144   70-178   70-270   350-080  , 1Y0-201   1z0-808  , NSE4   102-400  , ADM-201   SSCP  , 200-125  , 640-911   000-104   640-692   300-320   350-060   000-089  , 000-017   1z0-808   700-501   1Z0-051  , 70-177   M70-101   300-209   70-461   3002   N10-006   VCP550   70-487   300-320  , 3002   700-501   NS0-157  , 1V0-601   CAS-002