AARP Hearing Center
As students head back to college this fall, some families are still looking for ways to pay the tuition bill. Recent studies suggest that one option — private student loans — can pose real risks for the parents and grandparents who are often asked cosign for them.
LendEDU, an online company that specializes in student loan refinancing, surveyed parents who cosigned for their children’s private student loans. Of the parents who responded, 56.8 percent said their credit scores have declined, and 65.8 percent said they have had to help their child make at least one payment. Perhaps not surprisingly, 35 percent said they regretted cosigning for the loans.
“Student loans are a confusing topic, and in many cases it’s the first time that parents have had to deal with this topic,” said Nate Matherson, cofounder and CEO of LendEDU. Cosigning is a common practice because most young adults don’t have enough credit history to get loans on their own. But it appears that many parents — nearly a third, according to the LendEDU survey — aren’t aware of the risks they’re signing up for.
“They don’t realize how serious it is to cosign, that they are fully responsible for the loan just like the primary borrower,” said Andrew Weber of My Credit Counselor, where his work focuses on private student loans. “Cosigning is really co-borrowing,” said Stacy Canan, assistant director of the Office for Older Americans at the federal Consumer Financial Protection Bureau (CFPB). According to CFPB estimates, 57 percent of people who have cosigned for a student loan are 55 or older.
