What is a co-signer on a student loan?


What is a co-signer on a student loan?
What is a co-signer on a student loan?

What is a co-signer on a student loan?

A co-signer is a person who also agrees to repay a loan with the primary borrower.

Sometimes, to obtain a private student loan, borrowers are required to have someone who guarantees and signs as a co-signer. Having a co-signer with a good credit history can get a student loan with lower interest rates. Before signing as a cosigner on a loan, or asking someone else to sign as a cosigner, you should consider the obligations and risks associated with cosigning on a loan.

  • Cosigners are equally responsible and legally obligated to repay the loan. A co-signer must consider whether he is willing and able to repay the loan, should the student borrower fail to repay it on time.
  • Any late payment or non-payment of a cosigned loan will affect the credit history of both the cosigner and the student. Before signing as a cosigner, the cosigner must decide if he or she is willing to risk damaging his or her credit history if the student borrower defaults on the loan.
  • Private lenders often hire collection agencies to demand payment from the co-signer. The creditor or debt collector can also sue the co-signer.
  • If you do not individually qualify for the credit, the creditor may require you to have a co-signer, but this person does not have to be your spouse.

Some loan servicers may offer to waive the cosigner’s loan once the primary borrower or student borrower has made a certain number of payments on time and met other credit requirements, including a credit check. Many student loan servicers don’t tell you when you might be eligible to release your cosigner from their obligations.

TIP: If you’re interested in exempting your cosigner, ask your loan servicer if you qualify and find out what steps are required. To help you, we’ve put together some sample letters that you can edit and send to the student loan servicer.

What are student loans?

Student loans are loans provided to a student for the purpose of paying for education-related expenses.

The annual cost of university education, including tuition, fees, housing, food, books, and supplies, is in the United States $22,826 if you are enrolled in a state-funded university and $44,750 if you are enrolled in a private university. Some private schools can even charge more than $60,000 a year.

While the cost of higher education is affordable for some, most students need financial help to finance their dreams of a college degree. In fact, according to current statistics, of the 20 million Americans who attend college each year, 60% or 12 million need some form of financial aid/loan.

Where do the Loans come from?

The most popular source of student loans comes from federal student aid from the US Department of Education.

Here are the basic requirements for federal student aid student loan eligibility:

  • Have a latent financial need. (Financial need = cost of attending college minus your family’s expected contribution)
  • You must be a US citizen, US national, or have a Green Card.
  • Have a valid social security number.
  • Be enrolled in or accepted a degree or certificate program.
  • Have a satisfactory academic record.

The repayment period for a federal student loan can be 10, 20, or 25 years, depending on the repayment plan. (Visit https://studentaid.ed.gov for more information.)

You are probably wondering, “Is it really worth going to college if I need to get a loan?”

The answer is yes. First of all, a federal student loan has a low-interest rate. Second, by going to college, you will be securing your future. Earning a college degree substantially increases your future earning potential. According to the National Center for Education Statistics, among a group of young people ages 25 to 34, the average college graduate earns 114 times more than someone with only a high school diploma.


Casey Harward

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