This blog does not provide legal advice. If you need legal advice, please contact an attorney directly.
Nearly 92% of undergraduate private student loans and 63% of graduate private student loans were cosigned as of the 2018-19 school year, according to the MeasureOne Private Student Loan Report.
If you agreed to be a student loan cosigner for your child, grandchild or another relative, perhaps you didn’t read the fine print too carefully because you expected the primary borrower to pay off their loans on time. That doesn’t always happen, though, and sometimes loans end up in default.
If you cosigned student loans in default, here’s what you need to know about your student loan cosigner rights so that you can achieve the best possible outcome for both yourself and your borrower. From refinancing to student loan cosigner release, you have options in this situation.
- Understand your student loan terms
- Check up on your cosigned student loan
- Work with your lender ASAP
- Split student loan payments
- Take over payments temporarily
- Refinance the cosigned loan
- Hire a student loan lawyer
Generally, as the student loan cosigner, you are equally liable and responsible for repaying the debt that you cosigned.
The lender usually won’t turn to you for repayment unless the primary borrower starts missing payments. But if this happens, you will have the same responsibility to pay as you would if it was your debt. Any missed payments or even default will equally damage both your credit score and the primary borrower’s.
Here’s how to prevent this from happening — and how to move forward if it does.
First, review the student loan contract that you cosigned upon origination. For private student loans with a cosigner, each lender will have its own rules. The contract outlines details such as:
- When a payment is considered late
- Which events will trigger a private student loan default
- What your rights and responsibilities are as a cosigner
- If the lender offers any options like unemployment relief
If you know your student loan cosigner rights, you will be better prepared to work with the primary borrower if any issues arise.
If you’re the student loan cosigner, you usually won’t be notified right away if payments are late or overdue.
In fact, a cosigner might not be notified that the student loan is not current until it’s already defaulted and in collections. At this point, however, a lot of damage has been done. You’ll want to work quickly to avoid this issue.
To prevent this from happening, keep an eye on your cosigned account. Also, check in with the primary borrower every month to ensure that they are keeping up with payments.
You may also want to access your credit report from the credit bureau to which the lender reports account activity. You should be able to check the cosigned loan on the credit report to catch any late or missed payments before the account goes into default.
If the primary borrower is having trouble with their loan costs or has missed a student loan payment, take action right away. Contact the lenders and see what your options are and if they are willing to adjust repayments, even temporarily.
Many lenders offer discretionary forbearance or unemployment protection, which will temporarily pause repayment. This will give the primary borrower a chance to get their finances back on track. You could also ask your lender to lower monthly payments for a while until they can afford to pay more.
Remember, it pays to be proactive. Lenders will be more willing to work with you on repayment if you contact them before the loan misses a payment or becomes delinquent.
If the lender doesn’t budge, work with your co-borrower to figure out how you can get the student loan current and ensure payments are made on time.
You might agree to each contribute a portion of the student loan payments. Maybe each pays half, or the primary borrower pays what’s affordable, and you make up the difference.
Be clear on who is responsible for sending payments where. Should each person send in their portion of the payment? Or should the primary borrower pay their portion to you,who in turn sends in the full payment? Make sure you agree together on a repayment arrangement that you both feel is fair and meets your needs.
You might need to fully take over making payments until the primary borrower can afford to cover these costs again. Again, talk to the borrower and reach an agreement on how this will work.
If you take over payments until the primary borrower can resume payments, do you expect to be repaid for your contributions? How long are you willing or able to cover these student loan payments? What do you expect the borrower to be doing to get to the point where they can resume paying off this loan?
Work out the details and set clear expectations for how to manage student loans with a cosigner. If the borrower agrees to repay you, make sure you understand how you’ll recoup your money.
If you’re unwilling to repay this debt, try to remove yourself from the loan before there are ever issues with repayment. You might be able to work on getting a student loan cosigner release.
The other option is to refinance the student loan into your name. This gives you, the cosigner, full control over the debt, with the ability to choose repayment terms that fit your needs. There’s even a decent chance that refinancing could lower your student loan rates and help you save interest, especially if you take the time to find your best lender for refinancing.
If you decide to take this step, refinance right away. Any late or missed payments could ding both the cosigner and primary borrower’s credit scores. This, in turn, will make it harder and more expensive for you to refinance.
Unfortunately, a cosigner in student loan default might not know there’s a problem until the loan has already defaulted.
In this case, the lender or debt collectors will start pursuing you for repayment or send the debt to collections. And the consequences can be big. The lender or collection agency might try to sue you, the primary borrower or both of you.
If you’re this far into the process, it is probably best to get professional advice. Consulting a student loan lawyer can help you understand your situation and options to find the best way forward. A student loan lawyer can also help clarify the details of your loan contract, your rights as a cosigner or borrower and your legal options with a loan.
Hiring a pricey student loan lawyer might not fit your budget, so here are some low-cost and free options to explore to find a student loan lawyer:
- National Association of Consumer Bankruptcy Attorneys (NACBA): Use the NACBA member directory to find information on lawyers in your local area who might be able to help you.
- National Association of Consumer Advocates (NACA): An entire section of the NACA website is dedicated to consumers who are having trouble with the servicing or collection of their student loans. Find a lawyer in your local area using the site’s directory and reach out.
- Bar associations: The American Bar Association (ABA) won’t give you a direct referral, but it will offer up three different types of resources by state — pro bono assistance programs, local and regional bar associations and lawyer referral services. You can then explore these resources to find lawyers that specialize in student loans.
- Legal Services Corporation (LSC): This nonprofit funds 133 independent legal aid programs to help people at or near the poverty level with various challenges — including student loans. You can visit the LSC website to find legal aid near you.
- Lawyer review websites: Consult a lawyer review website, such as Avvo or LegalZoom, to find a professional who specializes in student loan issues. Do note: Student loans might not be listed as a specialty. In this case, focus on lawyers who handle debt collection and debt settlement cases.
As a student loan cosigner, you need to view this debt as if it were your own. Track repayment and due dates just as diligently as you would if it were your debt. Because in the eyes of the lender, it is just as much your debt as it is the primary borrower’s.
Staying aware of potential issues on student loans as a cosigner is crucial to tackling challenges early and preventing missed payments, delinquency or default. Make sure you understand your private student loan agreement and your options to move forward.
Laura Woods contributed to this report.