Understanding Student Loans: Co-signers

Written by: Jacob Hallberg

With the Fall semester starting students are rushing to complete their financial aid requirements and the constant dread of money arises again. Some students are left with an underwhelming, inadequate student fund. With their bank account dwindling, they take the leap of faith and take out a student loan.

Student loans, when used to correctly, give students the means to complete their degree and pursue a higher paying job, thus paying back the previously aforementioned loan. However, life is often not as straightforward as most would entail it to be. Unseen life troubles can derail a student’s educational plan and put them into a spiraling pit of endless debt. The endless void grabbing at whatever needed cash is available from the loan holder. This endless black hole process often times further inhibits the success of the individuals that need money in comparison to their currency loaded counterparts.

This material gap of wealth divides populations and it’s no wonder why the wealthy exhibit a higher likelihood of success. Nevertheless, the very purpose of Front Range Community College is to give students an affordable and healthy means to pursue their education and to reach a higher level of intellectual involvement within their growing yet constricted society.

This gap is mitigated in some aspects when students take out loans to complete their degree when they otherwise would have been unable to afford. An unaffordable education is an education that ceases to progress and that is why loan companies capitalize on the prospective students’ ability to develop debt while getting an education.

The process of a student loan can be confusing to some and for good reason. The loan process deludes individuals with lower credit levels and the need to increase credit scores maintains involvement throughout many students’ lives. If your credit scores don’t match up to the needed requirement, students must take the next best thing. The Co-Signed student loan.

Co-signing a loan involves three active parties to continue with the loan. In most cases, these three parties consist of the lender, the bank- which in most cases is also known as the creditor, the co-signer, and the borrower. The borrower is usually the individual or student who couldn’t obtain a private loan on their own and needed the help of a co-signing member. That is typically how the process works. People who are unable to enact loans under their name for their education or other needs meet with a co-signer to put in place a cosigned loan.

Many people don’t realize the significance of a co-signer when enacting a loan. Co-signers are responsible for the loan in the event that the borrower fails to pay, even though the borrower has stated they will pay it back. As a co-signer you are being asked to guarantee the debt under your name. Furthermore, co-signers must be ready and capable of paying back the loan under the harsh circumstances that the borrower refuses or is unable to continue payment This stipulation is based on state law, however. Some states have concluded that the lender must first seek payment from the borrower before the co-signer. Furthermore, a co-signer may face a nicked credit number when the borrower refuses or is unable to pay forwardly throughout the loan.

The market for private loans is continuing to grow as well in the United States. Each year the overall accumulated debt from graduate students holds its measure at over $10 billion in new loans each year. Furthermore, this number is projected to increase in the future, further inhibiting a society which is trying to better themselves. The need for private loans often comes from the low amount of money offered each year by federal loans. The federal government places limits on the amount of loan available for students, probably for good reason. However, for some students the inability to afford their school after federal loans causes them to seek more expensive options.

Federal government loans are usually considered the best option for students as they have many different options that reduce the total accrued interest. There are subsidized and unsubsidized loans typically offered by the federal government for students. Keep in mind though, government loans do still accrue interest and are subject to similar repayment terms as private loans.

Subsidized loans have a grace period while you are attending school and until six months afterward in which interest is paid by the government. However, after your schooling ends, so does the grace period and the interests will start to accrue and show on the bill. Subsidized loans also require that you are enrolled at least half time, otherwise the grace period ceases to continue.

Unsubsidized loans are almost the exact opposite of subsidized loans because they start to accrue interest from the very first date of the loan disbursement. The plus side of the unsubsidized loan is that the interest itself doesn’t need to be paid until you finish school and, in fact, no payments need to be made until after your schooling is finished.

Private loans are the next frontier for students unable to fulfill their educational costs after using up their federal loan limits. Private loans usually do not offer as competitive grace periods as the federal government, but students are able to find many different interest rates offered through the multitude of lenders. This is where the co-signed loans usually start to begin. Private lenders try not to lend to students or borrowers which don’t have a healthy credit line or previous credit or loan history. The co-signer fills the gap of the inexperienced borrower and guarantees the loan itself.

The fate of the co-signer isn’t completely over once they sign the loan for the borrower. Borrowers are able to apply for the co-signer to be removed from the loan itself after they have established continued payment. The success rate of this process is utterly abysmal. Borrowers have seen a total failure rate of 90 percent when asking to release the co-signers from the loan. The co-signer’s chances to get a release from the loan might diminish because the borrower’s income isn’t sufficient enough or their credit score still remains at unstable levels.

Usually co-signers have some sort of familiar relationship with the borrower and this bond between each other can be damaged when money is an issue. A recent survey polled through an online query found that 38 percent of co-signers had to pay some money or all of the loan because the borrower did not pay or refused to pay, 28 percent noticed a lower credit score because the borrower paid later than expected, and 26 percent felt that the relationship with their borrower had worsened since the establishment of the co-signed loan. These numbers are surprisingly high considering that almost one of six United States adults have co-signed a loan for someone else. According to the aforementioned survey the most common instance of a cosigned loan was an individual over the age of 50 who was helping a child by co-signing an auto loan.

University costs are increasing each year at an astounding rate and it’s no surprise that more and more students each year must endure the burden of debt. Moreover, increasingly large amounts of debt become harder to overcome due to the cumulative effects of interest. Students and parents must work together to find an education that fits within their economic ability while also providing a foundation for healthy education. Student loans can be an especially challenging form of debt as it is nearly impossible to have forgiven through bankruptcy, which makes it quite different than all other forms of debt.

Does the fault of debt lie within the students or the Universities which force large amounts of economic cost? How should we as a society remedy the effects of debt within our educational background? Should students be entitled to a cost effective education that nurtures their growing minds and gives them the opportunities to become better for their own offspring and society? The answers may not be clear at the moment, but it’s clear that there is a growing problem of debt within the educational realm. The debt no longer lies on the students alone, it’s spreading to the parents and grandparents, removing the chance of a long and prosperous retirement.

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