Advice please... cosigning for a student loan

JourneyToBaby · May 2012

My very close friend has been asked by her 17 year old sister-in-loan to co-sign for a student loan for her freshman year in college. Her parents (my friends in laws) cannot afford it and cannot sign the loan. She says that she has applied for every grant, scholarship, every loan and even asked another family member to cosign.

I'm at a loss for advice to give my friend. Of course she does NOT want to cosign, but it seems like this is a lose/lose for her. If she says no, there will be problems, if she says yes, the likelihood of future problems is great.

What would you do?

EastCoastBride · May 2012

Where does her DH stand on this?

JourneyToBaby · May 2012

She says that her DH is frustrated that they are asking us to do this when this is his sister--not his kid--and ultimately--not his responsibility. But feels about the same as her. Just doesn't know how to handle it. Doesn't really want to cosign, but also doesn't want to say no.

EastCoastBride · May 2012

I think if her DH is on the same page, then they need to suck it up and say "no". Yes, it will be hard. Yes, his family may be upset. BUT - cosigning a loan is huge and it's financially obligating them. I wouldn't do it.

I'd just say "I'm sorry but I'm not in a position to cosign". Nothing else really needs to be said.

I know this is worst case scenario, but they simply can't burden themselves financially just because they are afraid to upset mommy and daddy!

Dochas · May 2012

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howleyshell · May 2012

Before she even considers this she needs to do some investigation:

1. Has she (and her parents) filled out the FASFA? (Federal application for student financial aid)

2. If yes - did her parents apply for and officially denied a parent ("PLUS") loan? When the parents are denied the dependent student automatically becomes eligible for more aid in their own name (no co-signer) - it's just not a subsidized loan.

3. What kind of a student is she?

4. What kind of a school is she wanting to go to? Could she go somewhere cheaper first to get her general education requirements out of the way? Is she going to a proprietary school where the cost is outrageous and only 20% of the students who start the program actually finish it?

and

5. What exactly will this money be used for? Tuition only? room and board? A new computer?

I used to work in admissions for a private (for profit) college. Most schools (even community colleges) have a student financial aid department where someone who specializes in this stuff will sit down and walk you thru the information. I would demand to have that meeting with the student and the parents before I even remotely considered co-signing for a loan.

JourneyToBaby · May 2012

Thanks to everyone for the advice, I will definitely pass it all along to her. xo

soccerwife · May 2012

EastCoastBride:
I think if her DH is on the same page, then they need to suck it up and say "no". Yes, it will be hard. Yes, his family may be upset. BUT - cosigning a loan is huge and it's financially obligating them. I wouldn't do it.

I'd just say "I'm sorry but I'm not in a position to cosign". Nothing else really needs to be said.

I know this is worst case scenario, but they simply can't burden themselves financially just because they are afraid to upset mommy and daddy!

This

BeccaLandes · May 2012

i would definitely be wary of co-signing for a student loan (or any kind of loan, for that matter!). good luck to your friend- i think howleyshell's advice was great!

Smudges*Mom · May 2012

First, HS's advice was spot on. There are a lot of questions to be answered and protocol to be followed first.

I may be a mean and bitter person, but if the parents of said soon-to-be college student are not able to co-sign for their daughter, how in the he!! is it reasonable to ask the brother? It sucks that the parents are not in a place to help, but a sibling should not be expected to risk their financial wellbeing. And, if college tuition is too burdensome of an expense right now, perhaps the soon-to-be college student needs to consider plan B or plan C. College is a privilege, not a right. It sucks, but sometimes, so does life.

AuburnBride06 · May 2012

Agree with Howley and Smudges. We have something similar in our family (a family member did co-sign for another family member's student loan) and it has actually caused a huge rift in the family bc the person who cosigned claims that they are not able to qualify for another home alone (to get their next upgrade) because of the large loan showing up on their credit. They asked this other family member to get them off the account and supposedly they tried to no avail and now they do not speak to each other or have any contact and got some of the rest of our family involved in the fight. According to the person who received the loans, they have never be in default/are current. We didn't get into it so I dont know any more details. But other than us, much of the family has separated from this person. I dont feel like it's anyone elses business, but whatever. Point is, while not co-signing could cause problems, co-signing could create even bigger problems. I wouldn't do it. She can also check work-study opportunities, which she can indicate on her FAFSA that she is open to it.

regenab · May 2012

I don't have any direct advice, but I will say make sure to pass on to her if she decides to do this to look into taking out a life insurance policy on her sister for the amount of the loan. By co-signing if her sister were killed in a car accident, she would be on the hook for the money. A life insurance policy on a 17-18 year old female would not be a lot. If is only for a couple of thousand that is one thing, but if she is co-signing on a loan that is say 15K or more that would be a big debt in the case of a death. She can take out life insurance on her sister and pay the premiums and her sister wouldn't even need to be involved. This is something that financial advisors tell parents all the time that co-sign loans for children for college, take out life insurance to pay off the student loan in the event of a death. Student loan debt will not go away in the event of the death and it cannot be discharged in bankruptcy so they are responsible for this if it is not paid no matter what.

dusk42 · May 2012

AuburnBride06:
Agree with Howley and Smudges. We have something similar in our family (a family member did co-sign for another family member's student loan) and it has actually caused a huge rift in the family bc the person who cosigned claims that they are not able to qualify for another home alone (to get their next upgrade) because of the large loan showing up on their credit. They asked this other family member to get them off the account and supposedly they tried to no avail and now they do not speak to each other or have any contact and got some of the rest of our family involved in the fight. According to the person who received the loans, they have never be in default/are current. We didn't get into it so I dont know any more details. But other than us, much of the family has separated from this person. I dont feel like it's anyone elses business, but whatever. Point is, while not co-signing could cause problems, co-signing could create even bigger problems. I wouldn't do it. She can also check work-study opportunities, which she can indicate on her FAFSA that she is open to it.

I think if you are a cosigner, the loan will appear on your credit report until the loan is paid off, even if the loan is being paid on.

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Advice please... cosigning for a student loan

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