What to Know About Student Loan Cosigners

By Danielle Wirsansky on August 23, 2017

It is an unfortunate truth, but oftentimes attending college can bring debt upon a student. In order to make college an option, many students are required to take out loans in order to support themselves through college and to pay for tuition.

According to Scott Weingold, co-founder and principal of Ohio-based College Planning Network, ”Other than Stafford or Perkins loans, most loans outside of those are going to require a cosigner.”

Without a credit history established, most students will not be able to qualify for any loans. Additionally, MeasureOne, a San Francisco firm that provides data and analytics on private student lending, reported that nearly 94 percent of private undergraduate student loans during the 2015-2016 school year were made with a cosigner.

Cosigners are often necessary in order for a person to afford college. But what is some basic information about the process and the role?

Read on to learn what you should know about student loan cosigners!

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What qualifies a cosigner

In order to understand what makes a person eligible to be a cosigner, you must understand what exactly a cosigner is.

According to Credit.Com, “In a nutshell, a cosigner is someone who guarantees that they will be legally responsible to pay back a debt if the borrower cannot pay.”

“Some of the best people to consider reaching out to are a trusted friend or family member with a good credit history and a solid income history … Just like with a personal loan, an auto loan, a mortgage or a credit card balance, your cosigner will be legally responsible to make the payments if you default on your student loans.”

Once you have found someone willing to cosign for you, you need to make sure they are qualified to do so. The four main principles that banks look for in cosigners are a promise to pay, good credit themselves, sufficient income, and stability.

As stated, a cosigner not only agrees but guarantees the repayment of the loan, meaning they are committing to paying off the loan if the student does not.  They must also commit to paying any late fees incurred by a student should they fall behind on their payments. The bank will require the cosigner to sign a contract guaranteeing repayment of the loan. As to credit, the banks want to see that the cosigner is responsible with their money and so they look for sufficient information on how well they manage their own debt. Those with scores of 700 and up are most likely to be accepted as cosigners because they’ve established a good debt-repayment history.

As for sufficient income, the banks want to make sure that the person committed to repaying them if the student borrower cannot is not already in debt. A person in debt cannot pay off a student’s debt — the bank will not want such a person as a cosigner because they do not trust them to actually make the payments they say they will, as they did not even cover their own.

Stability is important too, so someone that has lived at the same address for several years or who has held down the same job for a regular period of time is more qualified as a cosigner than someone who moves a lot or changes their place of employment too often.

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What is a cosigner responsible for

Credit.com helps lay out the responsibilities of a cosigner.

“Basically, a cosigner’s responsibility is to pay back the debt if the signer does not, plain and simple, and that can include late fees and collection fees. And in some states, a creditor can attempt to collect the debt from the signer and cosigner simultaneously or, in some circumstances, attempt to collect first from the cosigner, including garnishing of wages. State laws vary, so it’s good to check on what rules apply where you live. It’s also good to keep in mind that, if the debt goes into default, it can become a blemish on the credit report of both the signer and the cosigner. The lender must disclose all the cosigner’s responsibilities before that person agrees to the loan obligation.”

A cosigner is lending their good name to a student to help them achieve success. Experian explains how if the student taking out the loan passes away, loses their job, or somehow fails to make their payments on time, the cosigner is still on the hook to pay off the rest of the loan. The loan will show up and be reflected not only in the student’s credit reports but that of the cosigner as well until the loan is paid off. It is also the cosigner’s responsibility to make sure that the loan payment is made each month, even if the bank does not inform the cosigner that the student has not made their regularly scheduled payment. Any late fees incurred are also the cosigner’s responsibility.

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