7 Things to consider when cosigning a student loan

Thinking of cosigning a student loan?

If your student’s applying for a private student loan, chances are they’ll need a cosigner—a creditworthy adult who agrees to repay the loan if the student can’t. Last year, students were 3.5X more likely to be approved for a Sallie Mae^® student loan with a cosigner.^{footnote 1} Before you commit to cosigning a student loan, here are some things you should know.

1. Cosigners are common for private student loans

Private student loans are credit-based, so lenders check both the borrower’s and the cosigner’s credit before approval. Federal student loans don’t check your credit—they’re based on the info you provide in the Free Application for Federal Student Aid (FAFSA^®). Note that federal PLUS Loans for parents and grad students may have a cosigner.

2. Lenders look at both credit histories

Lenders want to make sure both the student and the cosigner can repay the loan. They’ll check things like credit score, payment history, and any past issues like defaults or bankruptcies.

3. Students probably don’t have a long credit history

Lenders understand this, so that’s where you come in. When you’re added as a cosigner for private student loans, the lender has more assurance that the loan will be repaid. Your credit history is evaluated along with your student’s; the combination of both can give the student a better chance of being approved for a loan—maybe at a lower interest rate.

4. You’re legally responsible for the loan

Deciding to cosign a loan is an important decision. It’s a legally binding agreement that you’re willing to share the responsibility of repaying the loan on time and in full. So, if your student doesn’t make payments for any reason, you’ll be expected to make them. Missed payments can negatively impact your credit report as well as your student’s.

5. You don’t have to be a parent

Last year, 28% of Sallie Mae^® Smart Option Student Loan^® cosigners were someone other than a parent.^{footnote 2} A cosigner can be a relative, guardian, friend, or spouse. Only one person can cosign for a private student loan, and you can live in a different state than the borrower. The most important requirement is that you have good credit and understand your responsibilities.

6. There are benefits to cosigning a student loan

Cosigning can help your student start building their credit history, which can help them in the future when they need loans, credit cards, or even a car. They may even have a better chance of getting approved at a lower rate. It can help them develop good financial habits and learn to manage their own debt.

7. You may not have to be a cosigner forever

Some lenders allow the student to apply for cosigner release after they’ve made a certain number of on-time payments and meet credit requirements. For Sallie Mae^® loans, a student can apply to release you as a cosigner after they’ve made 12 on-time principal and interest payments and meet certain credit requirements. 

Ready to cosign? 

Cosigning a loan is a big decision, but it can make a huge difference for your student’s education and future. Just be sure you know the responsibilities and you’re comfortable with them first.