What Happens To A Student Loan Cosigner If The Borrower Can’t Repay

Four dollar bills stacked on each other.

Flickr user Jeff Simms

A lot of responsibility comes with being a student loan cosigner. In essence, you’re agreeing to financially back a student borrower, and will cover the cost of their loan if they default or can’t repay it.

Why Would Any Student Ask You To Cosign A Loan?

Most students haven’t had much time to build their credit history. This makes it difficult for them to borrow money from private lenders as most loans are approved based on the applicant’s credit history. The only way a student with no credit history can get approved for a loan is if they meet these two conditions:

  1. The student must have a cosigner
  2. The cosigner must have a good credit history

The lender will approve your loan application based on your cosigner’s credit history.

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What it Means to Cosign and the Mistake Most Cosigners Make

The mistake most cosigners make is in believing that when they cosign a student loan they are just offering up their credit history so that the other person can get the loan approved. This is far from true. It is important to understand that when you cosign a student loan you are, in fact, assuming responsibility for the loan. This includes the responsibility to pay back the outstanding loan amount with interest and any penalties that may arise from the late or missed payments.

What Happens if the Borrower Cannot Repay

If the borrower cannot afford to make the payments and defaults on the loan, it does create a worst-case scenario for you as you end up facing all the consequences just as if you had borrowed the money yourself.

The first thing that will happen it that it will go down in your credit report and damage your credit score. This will make it more difficult for you to take a mortgage on a home or take a loan to buy a car anytime in the future. Even if you do get approved for a loan, it will almost definitely be at a higher rate of interest. (A strong credit history is a key factor in getting a loan at the lowest rate possible).

In addition, the lender can take any action they deem necessary to recover their money. This includes filing a lawsuit against you.

If the person you cosigned for lets you know about their financial problems when they miss the first payment itself and before the loan goes into default, you can still protect your credit history and prevent a lawsuit by covering the monthly payments till the borrower manages to regroup and can start making their monthly payments again. Unfortunately, this rarely happens. In most cases, the cosigner gets to know that there is a problem only after the loan is in default and by then the damage is already done.

Should You Cosign A Student Loan?

Cosigning a student loan will help a student get a college education, but this is something you should do only if you know the borrower well and are sure that they will hold up their end of the commitment. It’s not worth the risk to cosign a student loan for somebody you don’t know very well.

Use College Raptor’s free Student Loan Finder to compare lenders and interest rates side by side!


Lender Rates (APR) Eligibility
Sallie Mae logo.
1.13% - 11.23% Variable
3.50%- 12.60% Fixed
Undergraduate and Graduate
Credibe company logo.
0.99% - 11.99% Variable
2.94% - 12.99% Fixed
Undergraduate and Graduate
Lendkey company logo.
1.13% - 11.23% Variable
3.50% - 12.60% Fixed
Undergraduate and Graduate
Ascent company logo.
1.51% - 9.09% Variable
3.24% - 11.33% Fixed
Undergraduate and Graduate
College Ave company logo.
0.99% - 11.98% Variable
2.94% - 12.99% Fixed
Undergraduate and Graduate
2.93% - 5.67% Variable
4.35% - 7.15% Fixed
Undergraduate and Graduate
Earnest company logo.
0.99% - 11.44% Variable
2.94% - 12.78% Fixed
Undergraduate and Graduate
1.20% - 11.52% Variable
3.20% - 11.99% Fixed
Undergraduate and Graduate
College Raptor is not a loan lender and does not assume responsibility for suggesting a loan to a user who may not be eligible for it. Rates, terms, conditions, eligibility, approval, and other considerations are the decisions of the lenders and may vary depending on which lender or marketplace the user selects. We urge users to carefully consider and review all loan options and terms before committing to taking out a loan.

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