How to Understand the Obligations of Co-Signing for a Student Loan

Many times a lender will require the student to get a co-signer for their loan since most college students do not have a proven credit rating or sufficient income. When you are asked to co-sign a student loan, you need to be aware of the obligations that you are incurring by putting your name and credit rating on the dotted line.

Instructions

    • 1

      Realize that if the student does not repay the student loan, the creditor will come after you for the money.

    • 2

      Know that liability for the loan will be included in your debt-to-income ratio, even if you never have to pay a nickel of the debt. Your debt-to-income ratio is what creditors use to determine your fitness to borrow money, so co-signing a student loan now reduces your ability to borrow money later.

    • 3

      In some states, the lender has the right to come after you for repayment if the loan goes into default without even trying to collect from the student.

    • 4

      If the creditor has attempted to collect from the student and failed, the late fees and collection costs are passed on to you, in addition to the original debt amount.

    • 5

      Federal law requires that you be given written notice of your obligations as a co-signer. Read these carefully and keep a copy handy.

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