Cosigning a Loan

A cosigner is a person who agrees to be jointly responsible for repaying a loan with the borrower. The cosigner is equally responsible if a loan's debt 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 without a 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 the borrower has considered all other sources of government and private aid money. 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. Grant and scholarship aid is always better than student loans. Federal student loans may have more favorable terms and conditions for the student borrower than a private loan. 
  2. If you are the student’s parent, you should consider borrowing a federal PLUS loan. PLUS loans may have more competitive interest rates and better terms than private loans. PLUS Loans 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:
    • If the borrower does not pay any or all of the full loan amount due, you are reponsible for making that payment; 
    • 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.