3 Reasons to Cosign Your Child's Student Loan

3 Reasons to Cosign Your Child's Student Loan
The cost of higher education in America has been steadily increasing for years, making it difficult for students to afford tuition. Many have turned to loans to bridge the gap between what they have and what they are required to pay. However, undergraduate students are limited in the amount they are permitted to borrow from the government, and that number does not always meet their needs. Fortunately, additional lending options are available and having a parent cosign supplementary loans can solve that issue. While reasons not to do so are often publicized, the benefits are not always presented. Here are three reasons why you should cosign your child’s student loans.
Lower Interest Rates and Faster Payoff
A major benefit to having a cosigner on student loans is the possibility of obtaining a lower interest rate. Lenders view the addition of a cosigner as a safety net of sorts, making the loan seem more secure. The better the credit of the cosigner, the more competitive the interest rate offered. By cosigning your student's loans, you are helping them pay a lower cost for borrowing the funds for school. Not only will the student pay less over the life of the loan, but the lower interest rate will also allow them to have a faster payoff than they may have had otherwise. Considering student loan debt in the United States is over $1 trillion, any assistance in paying those back goes a long way.
Help Build and Improve Credit
Like any other type of extended credit, student loans will have an effect on the borrower's credit score. In the case of loans that are cosigned, the cosigner's credit is affected, as well. The effect on both individuals' credit can be positive or negative. Regular, on-time payments have the potential to increase both signers' score even if the borrower is the only one making the payments. If your child secures employment and maintains regular payments, both of you will benefit from that stable financial behavior. This also applies if you are making the payments while your child gets to the place where they can make the payments themselves - their credit score will see a boost.
A Possibly Temporary Arrangement
Student loan cosigners are not necessarily committed to the loan for the entire repayment period. Several servicers and lenders provide provisions for releasing cosigners from the loans. Typically, the conditions that must be met include a minimum number of consecutive on-time payments, with some only allowing the release at a certain point in the life of the loan. If your child has taken advantage of the low interest rate and built their credit, you may be eligible to be released from their loans. There is also the possibility of being released as a cosigner if your child refinanced their loans. Being released from the loan provides another opportunity to improve your credit by lowering your outstanding debt.
Assisting your children with financing their education can be a positive experience for you both. Your child will benefit from lower interest rates, a faster payoff and less debt.

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