I know some parents do not have a choice when it comes to borrowing for their children’s education, and I understand that a lot of parents out there will have to take out some loan to finance a decently priced college or university. As a parent, you have the responsibility to take care of your child and give him or her, the best education possible, but on the other hand, you have the responsibility to take care of yourself, financially. So, for Parents thinking about cosigning Private Student Loans for their children, there are few things that you might need to consider before you commit yourself.
Your credit score is on the line
A creditworthy cosigner can help in many ways, that why you will find that parent co-signs almost 90 percents of private students’ loan according to a report by CFPB. Yes, there is an advantage that a Student can access credit and at the same time get lower interest rates. But parents are on the hook if the student is unable to repay the loan at any point in their life because the moment you sigh it, you are equally obligated to pay the loan as your child, and this may harm your credit score.
Did your child apply for federal student loan first?
Federal students’ loans do not require any consignor, so the first thing to consider is whether your child applied for these loans. These loans are a better option because they have a fixed rate although as the student borrow more each year, there are other loans that could have different fixed rates.
Look for a Federal Plus Loans
This is a much better option, but if you have a bad credit history, you cannot take this loan on your own unless you have an endorser who has a better credit history. The endorser could be anyone like a relative, but it shouldn’t be the student. So in this case, you will be prepared to pay the loan by yourself.
Think before you sign
Any parents thinking about cosigning Private Student Loans for their Children should think of other alternatives before they consider this option. Remember you are equally obligated to repay the loan, and this means you are using up your credit resources. This doesn’t mean that you are not taking care of your child, neither does it mean that child is an irresponsible person. It means that, young adults do not have a guaranteed source of income when they leave college, and some of them may not even finish college. By not consigning, you are giving them the opportunity to take control of their life, make them understand that they are responsible for their life, and help them look for a better alternative.