Tips for Selecting a Co-Signer (or Endorser)
Most private student loans require borrowers to apply with a co-signer, who promises to repay the loan if the student borrower fails to do so. There are times that PLUS and Graduate PLUS borrowers will need an endorser, which is much like a co-signer. Here are several tips borrowers should keep in mind when requesting that someone be a co-signer or endorser.
- Select an individual who you are close to and who is also financially stable. Many people will ask their immediate family members. Some people will ask extended family members, close friends, or even trusted colleagues who are supportive of your higher education goals.
- Review the reasons for needing the loans. Talk with the potential co-signer about your academic career plans. Review the cost of attending the chosen academic program and review other sources of financial aid, such as scholarships and grants, as well as sources of cash from savings or from income.
- Ensure that you have exhausted all other federal loan options. The potential co-signer may not be aware of the federal loan limits on Federal Stafford and Perkins Loans. Discuss the terms, conditions, and loan limits of all existing federal loans, noting that these loans are fixed-rate, government-backed loans that do not require a co-signer.
- Review the loan amount. Does the amount seem too high or too low? Adjust where appropriate, and remember that borrowing less, whenever possible, is always a good decision.
- Make sure the potential co-signer understands what is expected of him/her. Run some numbers to get a feel for what the monthly payments will be. Remember to account for additional borrowing over multiple years.
- Discuss when payments will start. For PLUS Loans, the first payment is due 60 days after the loan is fully disbursed unless you ask for a deferral while the student is enrolled at least half-time or up to six months after the student ceases to be at least half-time. For Graduate PLUS Loans, you may postpone payments on your loan until you graduate or drop below half-time status. Many private student loans begin repayment six months after leaving school. You may wish to contact the co-signer the month prior to when repayment begins to discuss the repayment plan.
- Complete the loan application together. Co-signers may feel more invested in the process if they participate in the application process online or via phone. Applying at the same time can ensure that you provide your information directly to the lender and that the details are correct.
- Talk about the potential of a co-signer release, if applicable. Some private student loans still offer co-signer release options. For instance, some co-signers may be released from the financial responsibility of a loan if the borrower has successfully completed school and made 12-48 consecutive on-time principal and interest payments. Make certain you confirm the terms and conditions of the release with the lender.