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Student Loan Game Plan

Cosigner's Guide to Successful Borrowing

Your Responsibilities as a Cosigner

As a cosigner, you are taking on a serious financial obligation. Use this information as a game plan to help your borrower prepare for repayment and avoid default.

As a cosigner, you bear a heavy responsibility.

Responsibilies of a cosigner
IF...   THEN...
Your borrower cannot make payments You will be required to take over payments until the borrower can resume payment.
Your borrower misses payments or is late making payments You and the borrower may not qualify for future loans and the loan may be reported to national consumer reporting agencies.
The loan is reported as delinquent to consumer reporting agencies The information may remain on your and the borrower's credit reports up to seven to ten years.

Borrowing for Success

The ability to successfully repay student loans is often tied to specific planning and actions on the part of the borrower. These may begin before the borrower ever applies for that first student loan and should continue while the student is in college.

Consider career earning potential

Borrowers who understand the actual starting salary in their chosen field and choose to limit borrowing accordingly are less likely to find themselves borrowing more than they can afford to repay.

The ability to repay student loans and manage other expenses is directly tied to career earnings. The most manageable monthly student loan payments are no more than 8% to 12% of the gross monthly earnings, which means the maximum total student loan debt should be approximately equal to the borrower's annual starting salary.

Help your student borrower understand the average starting salary for careers tied to his or her chosen major and how that relates to the maximum recommended level of student loan debt.

Perform well in college

A focus on good grades, hands-on experience and practical leadership helps students become eligible for the jobs they want.

  • Encourage your student to give you access to the college's online grade reporting system or provide you with transcripts periodically.
    • Determine if your student is taking an appropriate number of credit hours. To graduate from a 120-credit hour program within eight semesters, a student will need to take an average of 15 credit hours each semester.
    • Check for reasonable academic progress.
  • Encourage the borrower to call you if problems occur.
  • Watch for the warning signs:
    • Dropping classes.
    • Taking less than a full load of credits.
    • Declining GPA.
    • Complaining about struggling in a class.
  • If you spot trouble, encourage your student to:
    • Seek available help from professors, teaching assistants or an academic adviser.
    • Go to office hours or study sessions.
    • Find a tutor to help with specific classes.

Live within means

Borrowers who maintain a realistic lifestyle by earning more than they spend are better able to manage student loan payments.

Student loan funds not paid to the college may be given directly to the student. Students can spend these funds unwisely. Using up these student loan funds creates the need to borrow more, increasing loan balances so that they may be unaffordable after graduation.

  • Monitor your student's expenditures so you see how the money is being spent. Intervene if you notice your student making unwise choices.
  • Work with your student to consider whether the full loan amounts offered are needed to cover tuition, room and board, and books and materials. Suggest ways your student could pay for incidentals and other expenses without relying on student loans.
  • Use the lifestyle audit with your student to help him or her identify items that are needs instead of wants.

Review the projected budget your student received as part of the application process. Discuss the need to live on a limited budget now, to prevent the need to do so after college as they make their student loan payments.

Prepare for the job search

To help land a job that pays well enough to manage all expenses and student loan debt, successful borrowers often maximize their readiness for the market.

  • Ask your borrower about the earnings associated with the job he or she plans to obtain and whether those earnings will be enough to handle future student loan payments. The Return on College Investment tool provides a good resource for determining potential return on college investment.
  • Discuss the future and the borrower's career plans with him or her. You can help with career planning and provide the expectations you have for him or her to repay the student loan.

How You Can Help Your Borrower Succeed

You are putting your credit and financial resources on the line for the borrower; you have the right to expect him or her to meet clear goals and expectations that you mutually establish. You can be a large part of your student's college success story.

  • Review results from Student Loan Game Plan, and have frank discussions about them.
  • Encourage the borrower to take more steps to save money and reduce loan amounts.
  • Compare estimated annual student loan limits to the amount your student is borrowing this year.
  • Ask permission from your student to access college grades online, or ask for transcripts periodically. Watch for dropped classes, declining grades or lower-than-expected credit hours earned.
  • If you detect warning signs, make sure your student is accessing all available help and resources.
  • Most importantly, set mutually accepted expectations and hold your student accountable.

Why You Should Help the Borrower

As a cosigner, you and the primary borrower are equally responsible for the debt. If you and the borrower are unable or unwilling to make payments, delinquencies will affect your credit rating and history.