How Cosigning a Student Loan Affects Your Credit

When you cosign a student loan, you agree to take on equal responsibility for the debt. If the student misses payments, it will affect your credit. Even if the student pays on time, the loan gets added to your total debt load, which can make it harder for you to qualify for other credit, like a mortgage or car loan.

That's not to say that cosigning a student loan is a bad thing. In fact, most private student loans require it. In 2024, about 84% of students who applied for a loan did so with a cosigner, according to Credible marketplace data.

But it's important to understand how cosigning affects your credit before you commit. Here's what you need to know to make an informed decision and protect your financial health.

Current private student loan rates

Why cosign a student loan?

Many undergraduate students need a cosigner to meet the credit requirements of a private student loan. According to lender Sallie Mae, students who applied with a cosigner were 3.5 times more likely to get approved for one of their loans than those who applied on their own.

“Most students entering college have little to no credit history, making it almost impossible for them to qualify on their own,” explains Bruce McClary, senior vice president of media relations and membership at the National Foundation for Credit Counseling.

Adding a creditworthy cosigner to their application can also help students with poor credit access better interest rates.

However, cosigning a student loan means you agree to pay back the loan if the student falls behind. Even though you're not the primary borrower, you share equal responsibility for the debt. If the student misses payments or defaults, you'll be expected to pay back the loan.

Does cosigning a student loan affect my credit?

Cosigning a student loan directly affects your credit. When you apply for a loan, the lender will run a hard credit inquiry, which can lower your score by five points or less. This dip is usually temporary, and your score should bounce back with consistent, responsible credit use.

The biggest impact on your credit is how the loan is repaid.

“As long as payments are made on time, it can help both your credit and the student's,” says McClary. “However, if a payment is missed, it will negatively impact your credit score and can stay on your report for up to seven years.”

The loan will also appear on your credit report and count toward your debt-to-income ratio. If you're applying for a mortgage or car loan (or plan to soon), adding this debt could make approval harder.

What are the risks of cosigning a student loan?

Cosigning a student loan may feel like a straightforward way to help someone you care about afford their education, but it comes with some potential downsides. Here are some risks to be aware of:

• Potential damage to credit score: When you cosign a student loan, that debt will show up on your credit report and impact your credit score. If the student misses a payment, both of your credit scores will take a hit. That damage could take a long time to undo and could make it difficult to qualify for loans, credit cards, or other financial products.
• Difficulty getting new credit: Cosigning a student loan will also increase your debt-to-income ratio (DTI), or the amount of debt you owe relative to your income. Lenders consider your DTI when you apply for a loan or credit card. They typically prefer a DTI of 35% or less.
• Strained relationship if the student struggles with repayment: If the student misses payments or doesn't manage the debt responsibly, you might find yourself in conflict. Dealing with debt repayment could be stressful for both parties and could lead to a falling out.
• Debt liability if the borrower defaults: If the primary borrower fails to pay back the loan, you'll be responsible for paying it back. This includes any late fees and interest charges the debt racks up. One of the major risks of student loan default is that the lender can demand repayment from you, since you share legal responsibility for the loan.

Should I cosign a student loan?

Before you agree to cosign, have an open conversation with the student about what this commitment means. Discuss key questions like:

• Do they understand the loan terms, including the interest rate, repayment timeline, and monthly payment amount?
• Can they realistically afford the payments after graduation?
• What's the plan if they can't pay?
• Have they applied for scholarships, grants, and federal student loans first?
• How will they track payments to avoid missing one?
• Does the lender offer cosigner release after a set number of on-time payments?
• Are they fully committed to making payments in full and on time?

Talking through these points together helps ensure you're both on the same page about the financial commitment. You might come up with a contingency plan if the student's financial situation changes unexpectedly.

How to protect yourself as a cosigner

Cosigning a student loan comes with risks, but there are steps you can take to protect your finances:

• Prequalify before applying: Start by prequalifying with multiple lenders to compare loan offers. Prequalification only triggers a soft credit check, so you can avoid multiple hard inquiries that might lower your score.
• Set clear expectations: Discuss how much the student plans to borrow, what their monthly payment will be, and how they'll afford it. Make sure they understand that missed payments will affect their credit as well as yours.
• Review loan terms closely: Go over the repayment timeline, interest rate, and whether cosigner release is an option. This will help you decide if cosigning aligns with your financial goals.
• Monitor monthly payments: It's a good idea to stay on top of the loan payments after funds are disbursed. If a payment is late, stepping in quickly can help prevent serious damage to your credit.

Can you be removed as a cosigner from a student loan?

There are two main ways to be released from a cosigned student loan.

The first is cosigner release. Most lenders offer cosigner release after 12 to 36 months of consecutive, on-time payments. To qualify for cosigner release, the lender will review the student's finances, including their income and credit profile, to determine whether they can assume full responsibility for the loan.

However, this option isn't always straightforward, warns Megan Walter, senior policy analyst at the National Association of Student Financial Aid Administrators (NASFAA).

“Cosigner releases are not guaranteed,” says Walter. “Even if the borrower meets the minimum requirements, the lender may still reject the application if they determine the borrower cannot handle repayment independently.”

The second option is student loan refinancing. Refinancing replaces the original loan with a new one in the student's name only, ideally at a lower interest rate. To qualify, the student must meet the lender's income and credit requirements. If approved, they take on full responsibility for the debt and can choose a repayment term that works for them.