Student Loans for College

By: EconomyWatch Content   Date: 7 December 2009

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A large number of student loans for college are provided by the federal government and private lenders. Still, obtaining one is not so easy. Most education loans are based on the credit history of the student and/or the parents. However, students/parents with a poor credit score can succeed in obtaining a loan at lucrative rates by introducing a co-signer.

 

Student Loans for College: Adding a Co-signer

A co-signer is a US citizen or a qualified non-citizen, who has a good credit history and is willing to take the liability of the loan liability. Typically, a co-signer is a family member or friend, though a student may persuade a third-party to act as a co-signer by getting into a separate agreement with them.

 

A co-signer is liable for education loan repayments only when the primary borrower defaults. Adding a co-signer should be considered not only when suffering from a poor credit, but also when having a credit history lower than 27 months.

 

Some benefits of introducing a co-signer on a student loan include:

 

  • Better chances of approval for private education loans
  • Lowers interest rates, and subsequently lower cost of borrowing
  • Low origination fees

 

Adding a co-signer on student loans for college helps students to build their own credit history.

 

 

Student Loans for College: Removing a Co-signer

 

A student may consider removing a co-signer from a student loan if s/he has built sufficient creditworthiness. However, a student qualifies for this only when s/he has been making timely payments on the loan for an extended period.

 

A student loan holder can remove a co-signer from the loan by: 

  • Refinancing: This involves acquiring a new loan, at a lower interest rate, to pay-off the original loan. A loan need not be refinanced with the original bank or lender. A student can approach other lending institutions if they offer better rates and terms. 
  • Requesting the original lender: A student loan holder may succeed in removing a co-signer from the loan by requesting the existing lender, provided the student has sufficient credit. A lender usually conducts a thorough credit check before granting the request. 

When introducing a co-signer on a student loan, a student must be aware that the co-signer taking on a huge responsibility. This obligation is reported on the co-signer’s credit report as well, affecting his/her ability to obtain a loan in future. Thus, a student must strive hard to make timely payments, and free the co-signer of the obligation.


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