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What Does It Mean to Cosign a Student Loan?

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  • Written By: B. Miller
  • Edited By: Andrew Jones
  • Last Modified Date: 23 November 2016
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When an individual decides to cosign a student loan, he or she is agreeing to be jointly responsible for the payments -- or the full amount of the loan -- should the person applying for the loan default on it. In many cases, a parent or spouse will cosign a student loan for an individual if he or she is in college, and does not have enough credit history to get the private loan by himself or herself. The cosigner acts as a type of "guarantee" that the loan will be paid; should the student default on payments, the lender can come after the cosigner to make the payments instead.

There are numerous arguments for and against deciding to cosign a student loan. In some cases, if a student absolutely has to pay his or her college bills with a private student loan, but cannot get a loan independently, there are few other options. A person agreeing to cosign a student loan will likely have a longer credit history and possibly a better credit score, which may also lead to a lower interest rate on the loan. Most cosigners will agree to do so under the assumption that the student will pay his or her own debt, but this is not always the case.

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Financial advisors will often recommend avoiding cosigning a student loan at all costs. This is because, if the student defaults on the payments for whatever reason, the cosigner is fully responsible for making the payments until the loan is completely paid off. In all but the most exceptional cases, student loans cannot be discharged in bankruptcy. This can be costly for a cosigner who did not plan to make these payments, and may even damage his or her credit if she does not immediately realize that the student has stopped making payments, or if she can't afford to make the payments herself.

Put simply, agreeing to cosign a student loan means agreeing to share financial responsibility for student debt. It is not a decision that should be taken lightly, especially because private student loans can be astronomical, with equally high interest rates. Unless the student is able to refinance the loan in his or her own name, there is also no way to get a cosigner off the loan once he or she has cosigned it. Before agreeing to cosign a student loan, be sure to fully understand the fine print, and determine exactly what will happen if the student is unable to pay his or her own debt.

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