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Tips for student loan co-signers

Most private student loans have co-signers. If you’ve co-signed a private student loan, you have an equal financial responsibility and legal obligation to make sure the loan is repaid. If you co-signed a student loan, here are some things you should know.

Plan ahead to protect your credit

Have a conversation with the primary borrower when repayment begins. Ask the primary borrower if they can afford the monthly payment. If not, make a plan together.

Monitor loan payments. Whether or not you’re aware of the status of the loan, missed payments can hurt your credit. Ask the primary borrower or the lender for statements. You can check your credit report , too.

Be prepared to pay. A 2019 survey found that a quarter of co-signers end up making at least one payment because the primary borrower failed to. If you can start setting aside some money now, you’ll be more ready for that unplanned expense.

Ask the primary borrower to pursue co-signer release. Some loans allow you to be released from liability if the borrower makes payments for a certain length of time. Ask your servicer about the requirements and ask the primary borrower to commit to applying for release when they qualify. Lenders should be transparent about their co-signer release policies and publish qualification criteria on their website or servicing portal. If you have additional questions, here’s a sample letter to request further information from your lender about co-signer release

Be proactive if trouble arises

Because you bear equal responsibility for the student loan you co-signed, you can face consequences if the loan goes into default after several missed payments. The default will go on your credit report as well as the primary borrower’s, and the lender can sue both you and the primary borrower to collect on the debt. Debt collection can include garnishment of wages and offset of tax refunds and social security payments.

Encourage the primary borrower to seek relief early if they are unable to make payments. The lender may offer alternative payment plans or temporary pauses to the loan payments. You and the primary borrower should explore and understand these options and get any agreement in writing. Ask for a copy of any agreement that changes the loan payment.

Here’s a sample letter requesting a lower payment  that the primary borrower can use to ask for a lower payment.

If the primary borrower does not respond, you can reach out to the servicer to ask about relief options.

If the loan goes into default, the options for getting out of default will depend on the lender and terms of the loan. Honest companies will want to work with you to help you stay out of default. However, sometimes you and the primary borrower will need to ask about your options. They may include:

  • Rehabilitation programs are offered by some lenders. The primary borrower will have to call the servicer and ask if this is available. Be sure your lender tells the primary borrower all the requirements of the program, such as additional costs, and whether the default note can be removed or updated on your credit reports.
  • Paying enough to bring the loan out of default and into current status. The primary borrower can ask the lender about alternative payment plans with lower monthly payments. Once the loan is current if the primary borrower misses future payments, the loan can go back into default.
  • Paying off the loan is the simplest way to resolve the default if you or the primary borrower have the means to do so. Lenders can waive collection fees or reduce your principal balance. Ask your lender if they will work with you to reduce the amount owed if you are able to pay in full.

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