Five Things to Know Before Co-Signing a Private Student Loan – Applying for Financial Aid

It is important to understand that while private alternative loans are available for students to borrow, they should be the last resort of financing after State, Federal and Institutional financial assistance. The issue is that these types of loans usually require a co-signer, who will be responsible for repaying the loan if the student is unable to fulfill their responsibility of repayment.

The Wall Street Journal Total Returns article has identified that “More than 90% of private loans had co-signers in 2011, according to the Consumer Financial Protection Bureau, up from 67% in 2008. And more young graduates are failing to make repayments. So their co-signers – often parents, grandparents or even neighbors – are on the hook, Saturday’s Wall Street Journal reports.”

As per the Wall Street article, “Ms Marcoux, a parent already in debt with $80,000 in student loans after getting divorced and going back to school a decade ago co-signed for about $55,000 of her daughter’s loans. Unfortunately, the daughter was unable to keep making payments resulting with Ms. Marcoux with having to pay the loan. Ms. Marcoux had to sell her house to come up with the extra funds to pay her daughters loan debt. ”

Note: Alternative Private Loans should be the last resort in financing a college education.

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