Who Should Cosign Student Loans, According to Experts
Written by
Heather Taylor
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Amber Barkley
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Who should you ask to be a cosigner for your student loans? Figuring out the answer to this question takes several factors into consideration. Borrowers need to determine the best possible person, their financial standing and the worst-case scenario if something happens and the cosigner has to assume responsibility for their student loans.
GOBankingRates spoke to Angela Colatriano, chief marketing officer at College Ave Student Loans, and Yosh Miller, CEO and founder of Hadley, to get their expert takes. Here’s who should cosign student loans.
Who’s the Right Person To Cosign Student Loans?
When considering who should be your cosigner, Colatriano said borrowers will want to find an individual who is invested in their future.
Many borrowers start by asking their parents. If parents are not an option, borrowers can reach out to other family members. They can also use Miller’s recommendation to ask a trustworthy person they have a personal relationship with to be their cosigner.
Aside from being a trusted person, borrowers will also want their cosigner to possess these traits:
- Reliable and in good financial standing.
- Good credit. Colatriano said this can help borrowers secure a lower interest rate and save money over the life of the loan.
- Responsible and able to pay the loan back if the borrower no longer can.
Questions To Ask Before Cosigning a Loan
Cosigners need to ask borrowers certain questions, and get answers, before they cosign any student loans. Here are some of the most important questions to ask before signing any paperwork.
Loan Purpose and Amount
Colatriano said cosigners should ask the student why they are applying for the loan, the intended amount of the current loan and what they expect the total cost to be for their remaining years until graduation.
Generally, students borrow for school one year at a time. Cosigners should also ask students if they will need support cosigning future loans and be clear about whether you can offer this type of support.
Financial Aid Options
Aside from taking out a loan, will students also be exploring other financial aid options? Cosigners may ask students if they intend to work a work-study job on campus or get a part-time job to pay for any funding gaps.
Repayment Plans
Colatriano recommends cosigners talk to students about how loans work and their plan for repaying the loan and making payments on time.
“As a cosigner, any missed payments will also reflect on your credit, and you will be equally responsible for repaying the loan,” said Colatriano.
Cosigner Release
If a cosigner release is available, Colatriano said cosigners may have the student inquire about the terms for releasing them. Typically, this is available after the student has demonstrated sufficient income and a history of paying the loan on time.
Don’t Make This Cosigning Mistake
Miller said a common cosigning mistake is when older family members with limited savings cosign for their family member’s student loans. Doing so puts their financial health in jeopardy.
To avoid this scenario, Miller recommends opening a 529 account. For family members of limited financial means, they can contribute up to $10,000 per beneficiary, which may be used to repay student loans without being a cosigner.
Additionally, Miller said money in a 529 account can be rolled over into Roth IRA retirement savings. This may be done without income or age restrictions, offering flexibility for unused funds.
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