Student loan cosigner requirements explained

Cosigning can help your student pay for college

While there are responsibilities that come with cosigning a student loan, you’re also helping your student pursue their education.

• Most students don’t have a strong credit history; by cosigning, your credit can help get the loan approved.
• Your good credit may help your student get a lower interest rate on their loan.
• As your student pays back the loan, they’ll be able to build their own credit, which can help when they want to buy a car, rent an apartment, and even get a job.

What are a cosigner’s responsibilities?

As a student loan cosigner, you’re jointly responsible with your student for making sure loans are paid back. These responsibilities begin when your student begins to repay their loans after school.

When your student leaves school, they’ll have a grace/separation period—often six months. This is meant to give them a chance to get settled after school before they start making principal and interest loan payments. (Principal is the amount you borrow; interest is the amount you’re charged for borrowing the money.) Your lender should send the payment due dates and amount to both you and your student several months before the first payment is due.

Even if you or your student have been making monthly in-school payments, these new principal and interest payments will generally be larger than their previous ones. The earlier students can incorporate loan payments into their budgets, the smoother the transition will be to paying off their loans going forward.

Can payment plans be changed?

Private student loans (which are likely the type you cosigned for) generally don’t let borrowers change how they repay, so there may be less flexibility than with federal loans. Federal student loans have a variety of repayment plans that borrowers can apply for, like income-based, graduated repayment, or extended repayment options. (Note: Federal student loans do not require a cosigner.)

Steps to take if you decide to cosign a student loan

Money talks aren’t the easiest, but since you’re both responsible for the loan, it’s important to make sure your student understands your expectations.

Here are three questions to ask before repayment begins:

1.  Does your student understand loan repayment?

With the emotions of leaving school and settling into post-school life, paying back loans may not be on your student’s to-do list—but it should be. This is the time to make sure they know about the payments, how much they’ll need to pay each month, and when the first payment is due.

You can also explain to them that on-time payments can help them start to build their credit—which will help them rent an apartment, buy a car, or get a new credit card.

2.  Who’s going to make the payments?

There’s no one way that families decide this question. How America Pays for College 2023 by Sallie Mae and Ipsos found that 98% of families where the student borrowed expect the student to be at least somewhat involved in paying back the loans:

•  57% say the student is solely responsible
• 31% say the parent and student will share the responsibility
• 10% say the parent will be responsible until the student’s financially stable

But perhaps the most important statistic was that only 44% of families who borrowed discussed who’ll be responsible for paying back student loans. Have the conversation to make sure the responsibility is clearly understood by everyone.

3.  How’s your student’s financial situation?

They may be anxious about their finances. While it can be hard to see your student struggling, there are some things you can do to help:

• Help them create a budget so that everything is accounted for.
• Consider helping them with payments for a certain amount of time (you may be able to deduct a portion of the interest on your taxes).
• Free up some money by helping with other expenses, like their cellphone or grocery bills.
• Encourage them to call their loan servicer (if they can’t make payments) to see if there are any options.

As a cosigner, you’re able to monitor their payments to make sure they’re made on time. Be ready to work with your student if you see warning signs.

Also, explore the lender’s cosigner release policy. Usually, after on-time payments are made for a specific amount of time, the borrower can apply to release you from all responsibility for the loan. 

Before cosigning a student loan

Before a student applies for a loan, make sure they’ve worked to get money they won’t have to pay back, like scholarships and grants. (Scholarships aren't just for incoming freshmen; encourage your student to keep applying all through college!)

And be sure to file a FAFSA^® so they’re eligible for federal student loans. As a cosigner, the most important thing you can do is keep the lines of communication open with your student as both of you transition to this new phase.