Cosigning a Loan

A cosigner is a person who agrees to be jointly responsible for repaying a loan along with the borrower. The cosigner is equally responsible for the debt as long as it is outstanding, unless he or she is formally released from the obligation during repayment.

Benefits of Having a Cosigner

A creditworthy cosigner often enables a borrower lacking sufficient credit history to qualify for a loan. Also, the addition of a cosigner on a loan may result in better loan terms (e.g., lower interest rate or lower fees).

Steps to Take Before You Cosign for a Student Loan

Before you cosign, you should be certain all sources of government and private aid money have been exhausted. In addition, you should understand the responsibilities of cosigning a loan.

  1. Check with the student to be sure he or she has applied for all federal, state and institution-based financial aid. These sources offer grants, scholarships and lower priced loan options that should be fully investigated prior to applying for an alternative or private loan.
  2. If you are the student’s parent, you should consider borrowing a federal PLUS loan. PLUS loans are usually priced lower than alternative loans and now offer an in-school deferment while the student is enrolled at least half time. Click here for additional information on PLUS loans.
  3. If you decide to cosign, remember the following:
    • You are responsible for making any and all payments if the borrower does not pay.
    • The loan account will appear on your credit report in addition to the borrower’s credit report.
    • If the borrower misses a payment, your credit may be negatively impacted.
    • You should know who the lender is, how to contact the company, when repayment starts and how much is due per month in case the borrower has any issues.

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