Does anyone know about co-signing student loans?

[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.

[indysteel]

I'd also want to know the approximate amount in student loans they anticipate needing for the totality of their education. In other words, how manageable will their total indebtedness be upon graduation? It's one thing to cosign a $5k loan if the student's total debt will be $10k. It's another thing when the total debt will be (as it often is these days) $50k or more.

[lovelygamer]

Is the student not able to get federal loans by themselves? and yes, they aren't able to be written off in bankruptcy. Co-signers are liable, just like with a car lien.

[goldfinch]

Ask to read the loan paperwork to find out whether you will get notices and other info from Sallie Mae. I have heard of cosigners and guarantors of loans not finding out there was a problem until there was a demand that they pay off the entire loan in full immediately. I do not know what Sallie Mae's paper work looks like but you will want to know if the loan goes in default and you will want to have the opportunity to cure the default by catching up on past due payments and continuing with monthly payments.

[indysteel]

Is the student not able to get federal loans by themselves? and yes, they aren't able to be written off in bankruptcy. Co-signers are liable, just like with a car lien.

A student should try to exhaust federal student loans and all other aid before private loans are considered. There are a lot of resources on the Web explaining the pros and cons of federal versus private loans. I'd encourage you (and the student you're considering co-signing for) to read up on it before securing a private loan.

Some of the cons of private loans: Sometimes, although not always, repayment begins immediately rather than after the student graduates. The loan often survives the student's death or disabilty. Interest is often not subsidized, meaning that even if the loan repayment is deferred until graduation, interest will accrue from the time the loan is issued. Also look out for higher interest rates, prepayment penalities and other harsher terms.

[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.