<p>Every once in awhile, we get a student asking about having someone co-sign a big loan for them to go to college. (I’m not talking about the smaller Stafford loans that kids sign for, and I’m not talking about Plus loans that parents do.).</p>
<p>I’m talking about kids who want to borrow (with a co-signer) a large amount each year and the student would be solely expected to repay the loan. The co-signer’s obligation to pay would only happen if the student defaults.</p>
<p>Since these wouldn’t be federally guaranteed loans, wouldn’t the repayment begin immediately? Wouldn’t these be private bank loans?</p>
<p>I could be wrong, but it doesn’t seem like these loans would be deferred until after graduation. Or are there some loans that do get deferred like Stafford/Perkins loans?</p>
<p>I’m asking because if repayment begin immediately, then most students wouldn’t be in a position to do that (I would think).</p>
<p>The terms of repayment are determined by the lending institutions. There “could” be loans out there for college purposes that do not have to be repaid immediately. The interest would begin to accrue when the loan is dispersed.</p>
<p>Some states have loan programs for students and these loans are cosigned by the parents and they are deferred in terms of repayment. We know a family who used this in our home state with their kiddo for two year. Their payments are huge, however, each month (in my opinion…they borrowed about $40,000 for those two years). </p>
<p>The other issue is the cosigners have to look like they can repay the loan if necessary. Aren’t cosigners on loans also scrutinized by the lenders? What good would a cosigner without a job or sufficient collateral to repay the loan be to the lending institution.</p>
<p>I had a cosigner on my very first car loan out of college. My mom did NOT have sufficient income to cosign my loan. The bank would not accept her as a cosigner. Luckily, I had an uncle who was willing to cosign with me. Believe me…defaulting on that loan NEVER crossed my mind!!</p>
<p>So…regarding the cosigner…I think another question is…what do THEY have to bring to the loan application table?</p>
<p>*Aren’t cosigners on loans also scrutinized by the lenders? *</p>
<p>Oh absolutely!!! </p>
<p>And, a co-signer’s credit is hurt while the debt is outstanding - even if it’s not in default. A co-signer will have a harder time getting a good interest loan for himself when needed (for home, car, etc)… while that loan isn’t repaid.</p>
<p>I was more curious about when repayment begins… It would seem odd that a private bank would wait 4 years for a (non federal student) loan to begin repayments…but I have no idea.</p>
<p>I don’t know what lenders are doing these days, since credit is so tight. Last year, though, I had a student who insisted to me that her private loan was subsidized. I knew it wasn’t, but I couldn’t figure out why she thought it was. It turns out that her lender allowed her to put off repayment during school the way government loans are deferred - which she thought meant her loan was subsidized. She was REALLY surprised, though, when she dug deeper & found out that the interest was accruing the whole time.</p>
<p>Because we do not recommend lenders for private loans, I am not up on repayment terms. Finaid.org has lists of lenders & their terms, though.</p>