Does anyone know about co-signing student loans?

[ny biker]

I'm trying to understand what happens when you co-sign a SALLIE MAE student loan for a college student, over the life of the loan.

I know you have to provide information on the application, and you are responsible for paying the loan if the student cannot make payments. I'm trying to understand the logistics. For example, does the co-signer receive copies of all statements and other correspondence from SALLIE MAE about the loan?

Also, how does it show up on your credit report? Is it just listed like any loan that you are responsible for, or is there an indication that it is a co-sign situation, in case that somehow matters in your credit score?

I called SALLIE MAE and was transferred to 8 different people and all they can do is read me stuff that on their website. No one seems to know how it actually works.

I'm just trying to understand the ramifications over the long term.

Thanks very much.

[Irulan]

It will show on your credit report as a loan.
On ours, it didn't give any indication of us as co-signers, just that it is there as a loan liability.

[Trek420]

Not a financial planer, don't play one on TV, can't even balance my own checkbook but ... it might reduce your FICO score as it will show you have a higher ratio of debt to income.

I've found Sallie kinda clueless in dealing with them. Not surprised about the many transfers.

[bmccasland]

In general, the co-signer can be held responsible for the loan if the applicant defaults.

Thus parents (who in theory have more financial stability) would co-sign for the child/student.

[jessmarimba]

Are there any other options for you besides Sallie Mae? I don't find them trustworthy at all.

[SueDavis]

Check out your local bank. We have a daughter in school and just get her private student loans. Usually after 3 to 4 years of steady repayment history the cosigner is forgiven and it's all the students responsibility.

[withm]

Well this may sound harsh, and I don't know the specific circumstances about your request, so just consider this food for thought.

Suze Orman says no, don't co-sign any loans that you are not prepared to pay off yourself.

Student loans are not dischargeable in a bankruptcy. They never go away, and the interest keeps accruing. Students are taking out tens of thousands, if not more in student loans. Students attending ivy league colleges might end up with $300,000 in student loans, and no job. That's like a mortgage. Think very carefully before you co-sign any student loans.

If a bank won't give credit to someone without a co-signer, do you really want to grant credit to that same person, and then run the risk of having to pay it off yourself?

If the loan amount is just a few thousand for your own child, that may be a different story, and much easier if you get stuck for the repayment. But don't lose sight of the fact that you may still have to pay it off.

[indysteel]

It is possible to be released from a Sallie Mae loan as a cosignor once the student has graduated and successfully made a certain number of timely payments (12-24 consecutive months depending on the loan).

It is true that student loans are almost impossible to discharge in bankruptcy, although there is some movement afoot to change this. I wouldn't count on it though. I, personally, would only co-sign my own child's loan and only then if we had a clear understanding about cost containment and reasonable hopes for post-graduate employment. And I certainly wouldn't cosign if I fundamentally couldn't afford to absorb some or all of the liability.

[OakLeaf]

My parents had to cosign my law school loans. As soon as I graduated I refinanced in my own name through Sallie Mae.

I'd be more concerned whether the school is legit. For-profit colleges are a huge scandal these days. I'm assuming you know the risks and the character of the person you're considering co-signing for, but I'd say the biggest homework you need to do is on the school and their chosen field of study.

[MojoGrrl]

Not a financial planer, don't play one on TV, can't even balance my own checkbook but ... it might reduce your FICO score as it will show you have a higher ratio of debt to income.

I've found Sallie kinda clueless in dealing with them. Not surprised about the many transfers.

Actually student loan debt is considered "good" debt and does not hurt your FICO score.

[indysteel]

Actually student loan debt is considered "good" debt and does not hurt your FICO score.

That's a bit of an oversimplification. Lenders generally look more favorably on installment loans, like student, mortgage and car loans, than they do revolving debts, like credit cards. But, ultimately, all of your debt factors into your debt-to-income ratio, which is part of what lenders look at before extending credit. And, of course, any missed payments on any type of debt is going to impact your credit.

For students, paying a loan like a student loan on time can help build good credit and establish a good FICO score. For someone like the OP, who presumably has a credit history at this point--and hopefully a good one--adding a student loan debt as a co-signor isn't likely to help her credit score all that much and could hurt her chances at getting future extensions of credit.