Co-Signing a Loan and Your Finances

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When it comes to federal student loans, the loans that are included in the award of financial aid, a co-signer is unnecessary. 

Parent PLUS loans can be taken to help your child cover the cost of their education.  These loans, taken in your name, definitely obligate you to repayment.

Unfortunately, there are times when a co-signer is needed.  Such times are when private student loans come into play.

The question(s) to consider are whether you should co-sign on student loans for your child and whether you should co-sign on any loan for your child?  While you are helping your child cover the expense of an undergraduate education they would otherwise be unable to afford, if you haven’t planned properly, you are doing so at risk to your financial well-being.

  • You are obligated to repay the debt.  Certainly, if you’ve taken a Parent PLUS loan, you’re obligated.  And, if your child cannot afford to repay the private student loan, you’re obligated.  The difference between the two is that the private student loan typically has a lower interest rate and a number of repayment options the PLUS loan doesn’t.
  • Student loans are rarely dischargeable in bankruptcy.  This is true whether it’s federal student loans, Parent PLUS loans, or a private student loans.  Taking the loan isn’t the issue with which to be concerned; having a specifically-designed and implemented repayment plan is the issue.
  • There’s no “free-look” period with student loans.  Once signed, you’re on the hook.  While finances maybe fine at present, will they be so 5-10 years down the line?  Will you be nearing retirement and responsible for repayment during your retirement?  Will you still be in good health?  Proper planning with a professional college planner takes these possibilities into consideration.

A properly designed and implemented college planning campaign addresses the above risks and others that may arise.  Make sure you have peace of mind when it comes to college planning and your finances.

We look forward to your call.

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