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Should you cosign for a student loan for Junior?

Created: On May 25, 2011 @ 4:50 pm In

Many young people are unable to get private [1] student loans without a cosigner. Their parents may step in to help them get the loans the need, but end up putting their own financial security at risk. Here are some things you should think about when weighing the pros and cons of co-signing for student loans.

Federal vs. private student loans

Your kid should always apply for [2] federal student loans before turning to private loans. Federal loans such as the Perkins or Stafford are not based on credit scores, so there is no credit check. Students also do not need a cosigner to qualify for federal aid. However, private student loans do require a credit check, and your student probably won’t qualify without a cosigner. Depending on the lender the borrower may be required to get a cosigner even with a healthy income and credit score.

Parents’ financial profile

As a parent you should ask some questions about your financial situation–now and in the future. Use the following questions as a starting point:

  • Do you have a lot of credit card debt and other bills?
  • Are you having trouble making your mortgage payments?
  • Are you worried about your future job security?
  • Have you experienced a recent drop in income?
  • Is it difficult to make your income stretch between paychecks?
  • Have you saved a substantial amount for retirement?

Do you need debt help?

If you are already struggling to handle all your household expenses, co-signing for a student loan is probably not a good idea–if you can even qualify. If Junior defaults on a loan, as the cosigner you would be responsible for paying it back. Many recent graduates are coming out of school with no job prospects in sight, and that could happen to your kid as well. So think about whether heaping a student loan payment on top of all your other obligations would push you to a financial breaking point. If your finances are too out of control, it may be time to get [3] help with debt from a [4] debt counseling firm.

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URL to article: http://www.debthelp.com/blog/2011/05/25/should-you-cosign-for-a-student-loan-for-junior/

URLs in this post:
[1] student loans without a cosigner: http://www.debthelp.com/student-loans/
[2] federal student loans: http://www.direct.ed.gov/
[3] help with debt: http://www.debthelp.com//
[4] debt counseling: http://www.debthelp.com/debt-consolidation/credit-counseling.html