A student loan cosigner has the same responsibilities as the borrower, including making payments and paying off the loan if the borrower defaults. Cosigners should be aware of the potential consequences, including negative impacts on credit scores and difficulty getting credit in the future. It’s important to read the fine print before signing a loan.
Simply put, the responsibilities of a student loan cosigner are exactly those of the student taking out the loan. First, the co-signer’s credit history will be checked; this is because many borrowers will add a cosigner to the loan to get a better interest rate, so it’s important that the cosigner has a good credit history. The student loan cosigner will then be responsible for making payments on the loan and, essentially, paying off the loan in full, if the student borrower defaults on payments.
This is why it is important to be educated about the potential consequences of becoming a student loan cosigner. If the borrower is liable, the responsibilities of a student loan cosigner should ideally be no more than an initial credit check and, of course, ensuring that monthly payments are made. Someone who cosigns a student loan, however, agrees to be fully financially responsible for the loan if the payments don’t go through.
If the borrower misses one or more monthly payments, the loan company will contact the student loan cosigner requesting payment. If he doesn’t then start making payments, the student loan will default. When a loan defaults, the entire loan amount is technically due at once. Additionally, a defaulted loan will have an extremely negative impact on credit scores, both of the borrower and the student loan cosigner. A low credit score can make it much harder to get credit in the future and can affect your rates on things like car insurance, as well as make it harder to rent an apartment or find a job.
It is important to keep in mind that it is not possible to pay off a student loan in bankruptcy. It’s virtually impossible to get rid of a student loan for any reason, and student loan companies can often sue for the balance or even garnish wages to ensure payments are made. Securing a student loan for someone can be very helpful to them, but it’s generally not something that’s recommended between friends, or even in some cases between husbands and wives, because an ex-spouse may find themselves liable for someone else’s debt. Reading the fine print before signing a loan is necessary and important to be sure it doesn’t negatively impact your life down the road.
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