Higher education is one of the most important things for young people in today’s world. Many people are saying that a bachelor’s degree is the new high school diploma. Due to the changing nature of our economy and many of our industries, a college degree is practically a necessity for career placement in most fields. Unfortunately, many students have trouble financing their education. Tuition costs are on the rise, and when scholarships and financial aid packages fail to cover the expenses, most students start looking for loans. Parents everywhere are now faced with the decision of whether they should cosign on their children’s student loans.
The major problem with loans for students is that they don’t have sufficient credit to get loans on their own. Without a good credit rating and a reliable source of steady income, most lenders will be very hesitant to hand out money, and most college students lack both of those things. Naturally, many parents are hesitant to cosign on these loans for the very same reason. Taking out a loan is a major commitment, and putting your signature on a promissory note should be given due consideration.
Before you Co-Sign on that Student Loan
When you cosign on a student loan, you assume equal financial responsibility for the loan’s repayment. This is something that not all parents realize when they co-sign for their children and something that is even more frequently misunderstood by the students themselves. Be very clear about the ramifications of cosigning when you discuss this with your children. Should they ever become delinquent on their loans or become unable to make payments, the consequences will hit both of you. Your finances and credit will be at stake just as much as your child’s, and this is naturally somewhat intimidating for many parents. After all, many graduates do have trouble paying off their loans after college.
If you’re considering cosigning on your child’s student loans, first make sure that all other possibilities are exhausted. Most students are wary of racking up debt in college, so it is likely that they’ve already gone through every other resource. Still, however, it would be a good idea to make a trip to the school’s financial aid office if possible. College financial advisers will be able to give you the information you need and may be able to illuminate other possibilities for educational funding. There are more resources out there than you know, and some of them may be able to provide funds without the need for a cosigned loan.
If there is no other option, then, by all means, go ahead with the cosigning. Whether your children are going for their first undergraduate programs or pursuing a master of public administration online degree, they are going to need money. However, be sure that they have a plan for repayment in place. This is a debt that now belongs to both of you, but the students themselves are the ones who need to take responsibility for repayment.