Cosigning a Student Loan Requires Much Responsibility

You cosign a student loan, the bank has approved it, the money went into a bank account, the tuition and books and fees are paid. End of story. Right? Wrong. The duties of a cosigner do not end there. Initially, you should have a frank talk with your student regarding finances and try to advise them on the best course of action.Borrowing the proper amount is paramount. Too much could supply extravagance and a heavy debt on down the road. Too little could cause enough hardship to inhibit, or even end pursuit of higher education. Either way, your student loses and you could be stuck with the bill.The frank discussion should include possibility questions. What if your student quits? How will loan be paid off? How will we keep in touch? Is working part-time while studying be doable so a smaller loan will suffice? Could loan forgiveness programs such as those allowed by entering the nursing, teaching, or military fields be a possibility?Future of Your Student and Yourself Are at StakeBeing a cosignatory on a student loan obligates you to assume equal responsibility for repayment. It is an obligation that could adversely affect your credit rating should default occur. You should obligate yourself to gather and retain copies of all pertinent document. You should, of course, have considerable trust in the integrity and trustworthiness of your student.A cosigner legally obligates himself or herself to pay off the loan if the student fails to fulfill his or her obligation for whatever reason. If the student defaults, you are next in line for repayment. This could even result in property liens. This could be true even on the death or disability of the student.To be accepted as a cosigner on a student loan you have to document your credentials. Requirements are similar to those needed for taking out a loan on your own: Proof of identity. Proof of residency. Proof of employment and salary, as well as a history of same. Social security information. Monthly housing obligations. Outstanding debts roster. When you cosign, your credit history will be examined.Limit Required ResponsibilitiesA cautious cosigner should insist that the lender provide notification of any and all late payments. Demand a rider limiting the cosigner responsibilities to the principle only and no late fees or legal expenses. This offers some protection should the student go into default.Relief from cosigner obligation could occur in a couple of ways. If the student has a good repayment record for two years and meets certain credit requirements, the cosigner can often be removed from the loan. Some loans offer other protections. If you are a Sallie Mae cosigner, if the student dies or becomes disabled, the balance of the loan is forgiven. Check other loans, such as Perkins and Stafford loans, to see if these or similar protections apply.The responsibility bestowed on a cosigner after all the money has been spent, the classes taken, and the loan payments begin, could last for many years. Give careful consideration to all the factors that surround cosigning a student loan.