Co-Signing on a Child or Loved One’s Private Student Loans
May 12, 2023

Co-Signing on a Child or Loved One’s Private Student Loans

Co-signing on a child or loved one’s private student loan is a big decision. It’s a common occurrence because young people in particular will not have the necessary credit history to qualify for a loan by themselves. But there are serious risks involved for the co-signer and you might even need a debt relief attorney if things don’t go to plan. With this in mind, let’s take a look at everything you should want to know about co-signing on your loved one’s loan.

Why Co-Signing on a Loan is Sometimes Necessary

Private loans for a child (or loved one) can help them start building a positive credit history. However, most children and young people in particular do not have enough credit or financial history to be eligible in the eyes of a lender.

This is why a co-signer is often necessary and a way for your child or loved one to take out a loan in their own name. Most undergraduate loans are also cheaper than a parent loan which is why it’s a better option for taking out a student loan yourself. But what else might this arrangement mean for you?

Let’s take a look at some points you should keep in mind.

What You Should Know About Co-Signing on a Loan

Check for Red Flags with their Credit History

If the child or loved one is a young son or daughter, it’s likely they are yet to build up any credit history. Co-signing on the loan will enable them to use these funds for whatever they have in mind. If the individual is an adult with a job etc, there is probably a good reason why the lender requires a co-signer.

You really need to know this reason before going ahead with the arrangement because there is ”no smoke without fire” when it comes to credit history.

Ensure They/You Have the Financial Means to Repay the Loan

Studies show a large percentage of co-signers end up paying back all or at least some of the loan. This is usually because the borrower has failed to keep up with payments and this same scenario can happen with a loved one. This is also a reason why many co-signers turn to a debt relief attorney for help.

You can take steps to avoid this from happening by making sure they have the financial means to repay the loan. Also, you should run the numbers to ensure you are capable of making these payments yourself in the event of a worst case scenario. Any doubts? It may not be a good idea to be a co-signer then.

Co-Signing Might not be the Only Option

Depending on the circumstances, co-signing on a loan might not be the best option. For instance, a secured credit card is another way to start building a credit history and you can likely arrange one of these for your child. If you want to lend this money but don’t want to risk your own credit history, it might be best to take out the loan directly in order to control the repayments.

Remember to Protect Yourself from Risk

You should make sure the capacity of your child or loved one to make repayments is protected. This is because it is possible that they fall ill or become injured and cannot go to work, etc. An individual insurance policy can help cover these events and ensure you are not left footing the bill yourself.

The Co-Signer’s Credit History is on the Line

You put your own credit score on the line when you co-sign on a loan. If payments go through on time, there will not be an issue but late repayments or failure to meet payments will impact your own credit history. This loan will also affect your eligibility for other loans as the balance will increase your ratio of debt to income. On the other hand, your credit history might be improved if all payments are on time and the full balance of the loan is repaid as agreed.

You are Typically Tied to the Duration of the Loan

You will most often remain the co-signer on this debt for the duration of the loan. This is especially true for mortgages or loans related to a car or credit card. It’s important to keep an eye on progress for this reason and ensure your child or loved one is keeping up with the payments. After all, as the co-signer, you will be the one held accountable for this loan if the payments are missed.

Removing Your Name as Co-Signer (Due to Bankruptcy)

Some lenders will agree to release the co-signer after a specified period if responsible credit behavior is demonstrated by the borrower. There are also certain laws related to bankruptcy relief which can enable the co-signer to be discharged from their responsibility for the loan. If you have any issues in this regard, it’s best to contact a student loan attorney for advice as these lawyers will have the required knowledge and experience to help you navigate the process.


Co-signing a loan for your child or loved one can be a great way to help them establish a credit history. However, there are risks involved and you are typically tied to the loan duration until the balance is repaid. You are also legally obligated to cover this loan if the borrower doesn’t meet the repayments.  You could find yourself on the receiving end of collection letters, phone calls, or even a lawsuit, just as if you had taken out the loan for yourself.  You should contact a student loan attorney for help with any of the above.

Need some advice or assistance?

Get in touch with our team of debt relief lawyers at McCarthy Law.

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