Private Student Loan Co-Signing 101
Students who are getting ready to go to college and are in need of a private student loan may need a co-signer in order be approved. When determining an applicant’s eligibility, lenders look for credit history, income, and the ability to repay the loan. A student just out of high school may not meet all of the necessary loan eligibility criteria on his/her own, which is why having a credit-worthy co-signer is a good idea for many people.
Below are some of the commonly asked questions regarding private student loan co-signing. Here you will find information for students who need a loan and for people who are considering co-signing a student loan. If you have any questions, feel free to use the Ask the Experts page!
When is a co-signer necessary?
- Generally, you will need a co-signer to get approved for a private student loan if you do not have adequate credit history or income. Every lender’s approval criteria is different, and there may be programs available to you if you do not have a co-signer.
- There are also benefits to having a co-signer whether or not you absolutely need one. Having a co-signer on your loan application can greatly improve your chances of getting approved for a loan and, in many cases, may help you qualify for a lower interest rate.
Who can cosign?
- Anyone who meets the general eligibility requirements for a student loan can be a co-signer. The co-signer does not need to be related to the primary borrower. It can be a friend or anyone else who can apply for a student loan.
- When you are thinking about who to ask, consider that a co-signer should improve your loan application, and not detract from it. So choose someone with a good credit history, income, and ability to repay the loan.
What are the co-signer’s responsibilities?
- When a person decides to co-sign a student loan, he or she becomes responsible for the repayment of the loan, alongside the primary borrower. It becomes the responsibility of both parties to ensure that the loan is repaid. Because the loan is the responsibility of both parties, the repayment record affects both parties as well.
How is a co-signer added to the loan application?
- When you are using the Student Loan Marketplace to find lower rates on student loans, you will be presented with the option of adding co-signer information. Co-signers have the option of protecting their personal information by creating a separate account, which the primary borrower can then link to theirs. The personal information of the co-signer is then kept private.
What happens if the primary borrower neglects to pay?
- If payments on the loan are not made by the primary borrower, the co-signer needs to make them, as both parties share repayment responsibility equally. The lender may contact the co-signer if the primary borrower neglects to make payments on the loan, and in most cases, the lender will report the non-payment to the credit bureaus and it will affect both parties.
What happens if the primary borrower becomes permanently disabled or dies?
- With private student loans, what happens when the primary borrower becomes permanently disabled or dies will depend on the lender and the specific loan program. Check with your lender and make sure you read and understand the loan terms thoroughly.