In some cases, parents can cosign student loans, although it is optional and will depend on the loan type. Cosigners are common for private student loans as opposed to federal loans. We’ll break down when it makes sense to cosign, why you may want to, and what you’ll need to prepare for the application process.
Responsibility For the Loan
First, let’s talk about who takes responsibility for the loan. If you cosign a loan, you are equally accountable for the loan payments and ultimately the entire debt. If the primary borrower (i.e. your son or daughter) fails to meet payment obligations, the lender will require payment from you.
Financial Aid and Loan Options
Before we get into loan specifics, let’s address the financial aid process and the loan options that will be presented to you up front.
Free Application for Federal Student Aid (FAFSA)
The FAFSA is the starting point for the entire financial aid process. It helps determine whether you’ll qualify for free aid, as well as which loans you may qualify for. Filling out the FAFSA requires that you disclose information about your household, your assets, and income tax data.
Once the information is compiled from your FAFSA, your school will issue an award letter. You will get a breakdown of any gift aid you’re eligible for, along with information about federal or private loans you can borrow.
Federal Student Loans
You or your child may be eligible for federal loans. The federal loan options include:
- Direct Parent PLUS Loans
- Direct Subsidized Loans
- Direct Unsubsidized Loans
Parent PLUS Loan
Parents of dependent students can borrow the Direct Parent PLUS Loan. To help you qualify, especially if you’ve been denied the loan, you can use an endorser. This is the government’s terminology for a cosigner. Your endorser should be someone who does not have adverse credit history. And the cosigner cannot be the student for whom the loan is being borrowed.
Parent PLUS Loan Interest Rate
The interest rate for Parent PLUS Loans is based on the 10-year Treasury note plus a fixed margin. The current interest rate for the 2025 - 2026 academic year is 8.94%.
Undergraduate Student Loans
Dependent undergraduate students can borrow Direct Subsidized Loans. This loan does not require a credit check or a cosigner. And it is based on financial need.
Direct Unsubsidized Loans, on the other hand, can be used by independent students at the undergraduate and graduate level. One exception is if parents cannot borrow PLUS loans, in which case a dependent undergraduate student can be approved for Direct Unsubsidized Loans.
Private Student Loans
Private student loans can be used to supplement federal student aid. Students or parents can borrow them, and cosigners are highly recommended. Some families consider borrowing private loans in lieu of Parent PLUS Loans because of lower origination fees and more favorable interest rates, including an option to choose between a fixed or variable rate. But keep in mind that federal loans offer certain protections that private loans may not—particularly loan forgiveness programs and Total and Permanent Disability discharge (TPD).
Interest Rate
Compared to federal loans, interest rates on private student loans may be fixed or variable. Current rates range from around 3% to 17%. The actual rate you’re offered will depend on your creditworthiness.
Private Lenders
Below is a list of carefully vetted private student loan lenders that offer competitive interest rates, fees, and borrower benefits.
Cosigning a Student Loan
A student loan cosigner is a person with an established, positive credit history and proof of income. Most students need a cosigner since they do not yet have a proven track record and are likely to lack current income. Cosigners are typically:
- Parents
- Other relatives (such as grandparents, aunt/uncle, etc.)
- Mentors or someone you’ve known for a long time
As a parent, you can serve as a cosigner on a private loan to help your child get the additional funding he or she needs for school while helping them build their own credit history. Just remember that you are obligated to repay the loan in the event your son or daughter is unable to maintain monthly payments.
Cosigner Release
An important consideration for many people is a feature called cosigner release. This is when the lender agrees to legally dismiss the cosigner from the loan after the primary borrower has demonstrated a pattern of on-time payments and can pass credit requirements on their own. The number of on-time payments can vary by lender but are usually anywhere from 12 to 48 months.
Cosigner’s Credit Score
As a cosigner, you are required to have a good credit score and debt-to-income ratio. Every bank or credit union may have different credit criteria, so you’ll want to carefully compare the requirements before applying. That said, here are some common things that private lenders will look for:
- Citizenship – Must be a U.S. citizen or permanent resident
- Minimum FICO® Score in the mid to high 600’s
- Proof of current income
- Positive credit history including record of on-time payments
Credit History
If you have not reviewed your credit history in a while, you may want to obtain a copy of your full report at www.annualcreditreport.com. You’ll want to make sure there are no fraudulent line items in your report and that everything is accurate. Of course, you can also get updates through a credit monitoring service or even your banking institution, if you’re signed up for notifications.
Paying for College – The Bottom Line
Paying for college can be an expensive and complicated process, but it can be less stressful when you understand your options. In addition to knowing how you’ll pay for tuition, fees, living expenses, and other costs, you’ll want to establish strong communication around expectations. For some families, parents may not be able to pay for college costs outright. And loan debt is not only necessary, but perhaps a shared responsibility.
If you agree to cosign any student loans, establish an understanding up front around things like repayment timelines and cosigner release.