There may be several different reasons why you would consider co-signing a student loan for someone. Most often, co-signers are parents who co-sign their child’s loan but you may also just want to help support a friend or relative who is pursuing a higher education. If you choose to do so, you should be careful as there are risks that come with being a student loan co-signer. Since the people taking out student loans are often young adults with little or no credit history and no source of income, having a co-signer can help them obtain a better loan than they would qualify for on their own. As a co-signer, however, you are then equally responsible for paying back the debt, according to Money Crashers.
Money is sometimes a sensitive issue for people and by involving yourself in the money matters of a friend or relative, you may be creating a situation where your relationship can suffer if things do not go well. You may also want to take into consideration that your child may not be able to find a job right out of college and if he or she has no income, the loan payments will fall to you as the co-signer.
If your child is the one who ends up making payments on the loan, any late payments or delinquent balances can negatively your credit. In addition, in the event that tragedy strikes and your child is unable to pay because of death or a serious illness, you will still be liable for taking on the full amount of the remaining debt.
Finally, student loan debt is riskier than other types of debt in a few different ways. Lenders can seize your assets to pay off the debt, including any tax refunds you receive and your social security payments. Also, except in very limited circumstances, student loans are not dischargeable in bankruptcy.
