Should You Cosign Your Child’s Student Loans? Weigh the Pros and Cons

When you cosign student loans for your child, you are legally agreeing to be responsible for their debt. Their private student loan will be on your credit report, and it could hurt your credit if they forget to pay their bill. However, your child may need a cosigner to qualify for a private student loan, as most students lack the credit score or income required to qualify on their own.

Since cosigning on your child’s loans is a big financial decision, we’ve listed all the pros and cons to consider before moving forward. Essentially, although there are drawbacks to being a cosigner, there are also numerous benefits that can help your child establish credit and get better rates and terms on their student loans.

Table of Contents

1. Pros of cosigning a student loan
   1. ✅ 1. Cosigning can help your child qualify for a loan
   2. ✅ 2. Your child could get better loan terms
   3. ✅ 3. Establish your child’s credit history
   4. ✅ 4. You can monitor your child’s loan progress
   5. ✅ 5. You might not need to be a cosigner forever
   6. ✅ 6. Demonstrates support for your child’s goals
   7. ✅ 7. Gives an alternative to Parent Plus Loans
   8. ✅ 8. Helps your child avoid credit card debt
2. Cons of cosigning a student loan
   1. ✖️ 1. You are legally responsible for paying the loan
   2. ✖️ 2. Having an additional loan affects your DTI
   3. ✖️ 3. It can be hard to be released from the loan
   4. ✖️ 4. It could cause family strain
   5. ✖️ 5.  Cosigning could delay your retirement plans
   6. ✖️ 6.  Still required to pay if your child doesn’t graduate
   7. ✖️ 7.  Private lenders could garnish your wages if you don’t pay
   8. ✖️ 8.  There is no going back once you cosign
   9. ✖️ 9.  The loan could have an auto-default policy

Pros of cosigning a student loan

Becoming a cosigner of your child’s student loans is a big financial decision, but it’s also a decision that can help them get off on the right financial foot. Here are some benefits of cosigning a private student loan: 

✅ 1. Cosigning can help your child qualify for a loan

Your child might not have a long credit history. For that reason, many young college students do not have a high enough credit score to qualify for a private student loan on their own. If you have good credit and a stable job history, cosigning their loan can help to get their application approved because the lender considers your creditworthiness in addition to theirs.

While federal student loans don’t require cosigners, more than 90% of private student loans are cosigned. We recommend students exhaust all federal student loan options before considering private loans, but sometimes your kids will still need help paying for college after maxing out federal loans.

✅ 2. Your child could get better loan terms

Even if your child qualifies for a private student loan on their own, having a cosigner can lead to better loan terms, like a lower interest rate. A rate that’s even one percentage point lower could equal thousands of dollars in interest savings over the course of their loan.  

Essentially, the more qualified you are as a cosigner, the less the lender sees your student as a risk because you’re helping to guarantee the loan.

✅ 3. Establish your child’s credit history

In the future, your child will need good credit to qualify for loans for some of life’s biggest purchases, like buying a house. By cosigning on their student loans and helping ensure they make on-time payments, you are helping establish and build their credit history.  

Having a good credit score can also help them qualify for cellphones, apartments, and utility services. If your state conducts credit checks for insurance, it can also help them get lower car insurance rates in the future.

✅ 4. You can monitor your child’s loan progress

When you’re a cosigner, you won’t be in the dark about your child’s student loans. As a cosigner, you will have the ability to monitor your child’s loan progress. Most companies enable cosigners to create their own account and get notifications when payments are due. 

This can help you work with your child to ensure they can make their payments on time and establish a good credit history. It can also help you get notifications if your child is late on their payments.

✅ 5. You might not need to be a cosigner forever

Many private student loan lenders offer the ability to release cosigners. Depending on who you choose as a lender, being a cosigner can be temporary.  Each lender has different cosigner release policies. Usually, after making a certain number of on-time payments, your child can request that you be released from the loan, which ends your legal responsibility to pay it.

Tip

Sallie Mae is our choice for the best private student loan for cosigners because its generous cosigner release policy allows you to be removed from the loan after your child makes 12 consecutive on-time monthly payments.

✅ 6. Demonstrates support for your child’s goals

Cosigning your student loans can show your child that you support them and their educational goals. Many students might not be able to attend college without a cosigner helping them qualify for loans. Cosigning on a loan also creates a shared sense of trust. Your child knows that you support them and that you trust them to make their payments on time. 

✅ 7. Gives an alternative to Parent Plus Loans

Typically, we recommend that students exhaust all federal loan options before applying for private student loans because federal student loans offer significant protections and flexibility for student repayment.

However, one type of federal student loan, the Parent PLUS Loan, is designed for parents to take out to help their students pay for school. These loans, however, have high origination fees and interest rates. Many private lenders offer no fees and lower rates than Parent PLUS loans, making cosigning a private student loan an attractive alternative to the high cost of the Parent PLUS loan. 

✅ 8. Helps your child avoid credit card debt

According to a survey, more than 64% of college students have credit card debt, and 40.6% of them say they are using credit cards to pay for essentials, like groceries. 

By cosigning your child’s private student loans, you could help prevent them from paying for their educational needs using high-interest debt products like credit cards.

If a parent intends to pay for a portion of college, we recommend cosigning loans and paying them off rapidly to limit the interest paid on the loan. I did this for my children to build their credit.

Cons of cosigning a student loan

Although there are benefits to cosigning your child’s student loans, be sure you’re aware of the drawbacks before committing. Here are some examples:

✖️ 1. You are legally responsible for paying the loan

Even if your child agrees to make monthly payments themselves, you are still legally responsible for the loan. So if your child can’t pay one month, you will need to step in and make the payment yourself to avoid negative marks on your credit report. Payment history makes up 35% of your credit score, so it’s important to ensure all student loan payments are on time.

✖️ 2. Having an additional loan affects your DTI

If you want to borrow money in the future, like buying a house or car, your lender will calculate your debt-to-income ratio (DTI). Your DTI is the amount of debt payments you make each month in relation to your income. Even if you’re not the one making the monthly payments on your cosigned student loan, it still factors into your DTI, which could affect your ability to qualify for loans of your own.

✖️ 3. It can be hard to be released from the loan

Not every lender allows cosigners to be released from the loan in the future. For some, your child will need to refinance and get a loan only in their name for you to be released from legal responsibility. 

If you haven’t cosigned your child’s loan yet, make sure to choose a lender that will release you after a certain number of on-time payments. 

As we mentioned, our pick for the best private student loan lender for cosigners is Sallie Mae because cosigners can be released after just 12 on-time payments. Many other lenders’ cosigner release periods are between 24 and 48 months, and some don’t offer release at all.  

✖️ 4. It could cause family strain

If your child encounters financial difficulties and is unable to repay the loan, it could create family strain. If you are unable to cosign for your subsequent children because your DTI is too high, that could also harm your relationship with them. It’s best to set boundaries and expectations before cosigning on a student loan.

✖️ 5.  Cosigning could delay your retirement plans

Cosigning on student loans is a significant life decision. Knowing that you are responsible for this loan if your child is unable to pay could hinder your retirement plans. Because you’ll have an additional outstanding liability, it might cause you to rethink how much you need in retirement to live on, just in case your child is unable to make payments.

✖️ 6.  Still required to pay if your child doesn’t graduate

Cosigning your child’s student loans demonstrates your support for their education; however, it does not guarantee that your child will excel academically or graduate. Even if your child does not complete school or drops out, they are still required to repay the student loan.

✖️ 7.  Private lenders could garnish your wages if you don’t pay

If your child doesn’t make their student loan payments and you don’t step in to make the payment for them, your lender could sue you or garnish your wages. According to the U.S. Department of Labor, the Consumer Credit Protection Act gives lenders the right to garnish up to 25% of your weekly disposable income. 

However, according to the Consumer Finance Protection Bureau, private student loan companies cannot garnish Social Security checks.

✖️ 8.  There is no going back once you cosign

Once you cosign a student loan and agree to the loan terms, you cannot change your mind.  That means that if your child has an unexpected illness or you face an unexpected job loss,  you are still legally required to pay the loan. The only way you can remove yourself from the loan once cosigned is if the loan is paid in full or the lender (and your child) agree to release you as a cosigner. 

✖️ 9.  The loan could have an auto-default policy

Some private lenders have an auto-default policy, which states that your child (or you) must pay the loan in full if one of you dies or becomes disabled. That means if you die and your child can’t pay the loan, the lender could sue and even collect from your estate. 

However, if the student borrower passes away, some loans are discharged.

For federal student loans and for private loans without a cosigner, the student’s death typically cancels the loan.

If you cosign a private student loan, though, you may still be responsible for repayment even if your child passes away.

The CFPB recommends checking the loan terms carefully—or asking your lender directly—about what happens if a cosigner or borrower dies or becomes disabled.