A cosigner is someone who signs the private loan along with the student borrower. They’re legally obligated to repay the loan if the student fails to make payments. Anyone who is willing to can cosign a private loan (parents, grandparents, other relatives, close friends). Typically, the better the cosigner’s credit, the lower the interest rate for the loan.
A cosigner is usually required on a private student loan if the undergraduate student doesn’t have a strong credit history or regular income.
The risks of cosigning a student loan are:
A cosigner release means the consignor is released from any legal obligation to pay back the loan once the terms of the release have been met. This would remove the cosigner’s name from the loan, and the debt would no longer show on the cosigner’s credit report.
Lenders usually require anywhere from 12–48 months of on-time payments to be made before a borrower can qualify for cosigner release. In addition, they may require the student borrower to pass a new credit check, including credit history and debt-to-income ratio.
Not all private lenders offer cosigner release. Before signing for a loan, be sure to ask if this is an option, and what the terms are.
Summary: Once students have exhausted their federal student loan options, many families turn to private student loans to cover the funding gap. If your student needs a private loan to cover the expenses of college, make sure you understand the responsibilities of being a cosigner.
Have a conversation with your student about the amount they will be borrowing and if they expect to be able to make the monthly payments after graduation.
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This story was first published in our Paying for College 101 Facebook community. It’s been edited for clarity and flow.
This story was first published in our Paying for College 101 (PFC101) Facebook community. It’s been edited for clarity and
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