In these difficult economic times of student loans becoming more expensive and Federal Funding remaining fairly stagnant in the face of recession, it is important for borrowers to enlist the services of cosigners.
What are cosigned loans? Cosigned loans apply to all types of loan categories; mortgage, student loans, auto-loans or personal loans. They don’t just apply to periods when the borrower is fully unable to repay the loan based on all economic factors at the end of the loan repayment period, but also when the loan is in default.
Many students don’t have a credit history yet, therefore, if you are a new private student borrower thinking “do student loans need a cosigner?” the answer is yes. And it doesn’t just apply to undergrads. Graduates and professional students can also apply for these loans provided the loan can be matched against their employment prospects and how great a credit record both they and their co-signer have.
A cosigner for student loans would always be someone known and trusted to the borrower, and in ideal situations would be a parent, sibling, relative or close friend. Co-signing is a good measure of faith because it means fully taking on the cost of a loan that shouldn’t even be your own responsibility. Taking out loans is always pegged on the (in) assurance that students would get jobs immediately after college and start repaying their own loans.
However, the cost of credit has become higher while incomes have relatively stagnated and living expenses have become relatively higher. The needs of the borrower should always be pegged on the long-term ambitions of the co-signer. The cosigner should always keep in mind their own financial ability and viability in case the borrower cannot meet their own financial obligations. Also, remember that lenders will move great lengths to protect themselves. Only the borrower will be allowed to release the co-signer. Lenders will meet that release clause if you can prove beyond a doubt that you can meet the measure of the loan yourself through a certain number of timely interest and principal payments.
When to Not Cosign Student Loans
Student loans should always be maximized on the Federal side first, before ever needing to cross the private threshold. If you also feel that the credit rating and financial standing of the borrower would grossly affect your own future stability for any reason, hesitation would be your best call.
When the question of “do I need a cosigner for student loans?” emerges, it should be after a long, hard consideration of all the Federal and private options available to offset the cost of the loan by the borrower themselves.
You should definitely apply for loans through co-signing if you find yourself in a situation where you:
- Are taking time off work to go back to school.
- Are a new student looking to apply for a private student
- Are taking a mortgage or car loan.
- Are self-employed looking for some business capital and just can’t seem to nudge the right income.
Lenders will move to protect themselves in the event of any possibility of permanent or long-term default. This means that the nature of the borrower should be known to the cosigner. In as much as it is just a few pages of signatures on the loan agreement, cosigning might have life-long repercussions on the financial stability of the cosigner.
A student loans cosigner, especially one with a good credit record might be comforting for knowing that you can access the education that you need. However, it also bears much responsibility, knowing full well that somebody else might be forced to carry the cost of your own redress.
Do federal student loans require a cosigner?
The largest chunk of the $1.4 Trillion student debt burden is accountable to the Federal Government. Ultimately students need to repay the educational advance from the government. The government, however, offers reparative measures for student loan debt. Federal loans, both subsidized and unsubsidized do not need a cosigner because they are based on the borrower’s own credit record and their future ability to repay the loan.
So if you are wondering “do I need a cosigner for federal student loans?” the answer is no. Federal loans do not need cosigning.
Cosigning For Student Loans: What Are The Requirements?
Any private lender will have the repayment ability as the main factor to consider when thinking about cosigner requirements for student loans. Cosigners are usually parents, older relatives and friends who have already built steady credit records and already seem attractive to the lenders.
Cosigners are always the last resort for lenders, but even in-between late payments and delinquency on the part of the borrower can affect the cosigner’s credit record. Borrowers should, therefore, be well-known to the co-signer to a trusted extent.
Cases even arise where co-signing is needed where co-signers are needed for student loan refinancing or reconsolidation. Reconsolidation shouldn’t just be a case of loans going bad. But borrowers making the best decisions about how they can positively affect their financial futures.
Do You Need a Cosigner for Student Loans? Here’s Where to Start
Cosigned student loans should be the very last option after all federal and non-cost options such as grants and scholarships have been exhausted. These options are usually difficult or not possible for the majority of students because they need certain marked achievements on the parts of students to be affected.
Before you co sign student loans, you should make sure that the borrower has exhausted all these avenues if they are available. This is a long-term commitment, so you as a cosigner should get the best out of it.