Cosigner Rights for Student Loans

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As college enrollment continues to increase at a rapid pace and with the skyrocketing cost of matriculation, an entire generation of graduates is struggling to repay monstrous student loans. In some cases, cosigners are allowed on student loan debts. In these cases, cosigners are just as obligated as primary borrowers.

Cosigner Responsibilities

It's important to think carefully before cosigning a loan. There is a reason lenders refuse to grant credit to certain borrowers--their credit stinks. So, by cosigning a loan, you're essentially taking a risk that a lender refused to take. And lenders are the riskiest business people in America.

Cosigner Rights

Usually a cosigner only has rights if he is listed as part owner of an asset used as collateral for the loan. In these cases--like with a car, houseor boat--the cosigner has a limited right to collect part of the profit from the sale of said asset if it's seized by the lender. In the case of student loans, the cosigner has the responsibility to ensure the primary borrower is making payments on the loan.

No Rights

If a primary defaults on her student loan, it is the responsibility of the cosigner to cover the missed payments and back interest. The lender allows cosigners because it knows a cosigner with good credit won't risk his financial health by letting the cosigned loan default. Thus, a cosigner has few rights when it comes to defaulted student loans.

Private Agreements

One way cosigners protect their financial health and credit report is to make side deals with primary borrowers that do not involve the lender. In these arrangements--usually between family members and friends--a cosigner takes an asset from the primary borrower as collateral. This asset is returned to the primary borrower after the debt has been repaid. It's best to work out these arrangements legally with an attorney overseeing the process and paperwork.

Litigation

In some cases a cosigner can sue a lender. These suits are often as a result of coerced or fraudulent paperwork. Never cosign a loan at the urging of a lender. Instead, you should closely review the loan terms, the borrower's credit history and your own financial health. Any lender who attempts to force you onto a cosigned loan should be reported to your state's attorney general.

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