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Why You Shouldn’t Co-Sign Your Grandkid’s Student Loan
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College financial aid offers have been sent out, and the traditional May 1 deadline for high school seniors to pick their schools is fast approaching. That means all across this great land of ours, grandparents are getting hit up by would-be college students desperate to use their elders’ good credit.
Federal student loans don’t require co-signers, but private student loans typically do. If the student’s parents don’t have good credit scores or aren’t willing to co-sign, a loving grandparent may be asked to step in.
Most of the time, the grandparents should say no. Here’s why:
The loan will show up on a grandparent’s credit report and can have an impact on their ability to borrow money
Late payments can trash the grandparent’s credit scores and subject them to collection calls, lawsuits and potential wage garnishments or liens on bank accounts
If the grandparents take over the payments to preserve their good credit, the strain on their finances can endanger their retirement
Older people with student loans are more likely than those without such debt to say they’ve skipped prescription medicines, doctors’ visits and dental care because they could not afford them, according to the Consumer Financial Protection Bureau
Older Americans increasingly are saddled with debt they took on to educate the younger generation. The number of people 60 and older with student loans quadrupled from 700,000 in 2005 to 2.8 million in 2015, according to the CFPB. The average amounts they owe increased from $12,100 to $23,500 in the same period.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.19-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 6/30/2025. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
Variable APR
4.24-17.99%
College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply. (1)All rates include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. If a payment is returned, you will lose this benefit. Variable rates may increase after consummation. (2)As certified by your school and less any other financial aid you might receive. Minimum $1,000. (3)This informational repayment example uses typical loan terms for a freshman borrower who selects the Flat Repayment Option with an 8-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 7.78% fixed Annual Percentage Rate (“APR”): 54 monthly payments of $25 while in school, followed by 96 monthly payments of $176.21 while in the repayment period, for a total amount of payments of $18,266.38. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary. Information advertised valid as of 6/30/2025. Variable interest rates may increase after consummation. Approved interest rate will depend on creditworthiness of the applicant(s), lowest advertised rates only available to the most creditworthy applicants and require selection of the Flat Repayment Option with the shortest available loan term.
NerdWallet ratingNerdWallet's ratings are determined by our editorial team. The scoring formula for student loan products takes into account more than 50 data points across multiple categories, including repayment options, customer service, lender transparency, loan eligibility and underwriting criteria.
Fixed APR
3.19-16.99%
Lowest rates shown include the auto debit discount. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 6/23/2025. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Variable APR
4.37-16.49%
Lowest rates shown include the auto debit discount. Advertised APRs for undergraduate students assume a $10,000 loan to a student who attends school for 4 years and has no prior Sallie Mae-serviced loans. Interest rates for variable rate loans may increase or decrease over the life of the loan based on changes to the 30-day Average Secured Overnight Financing Rate (SOFR) rounded up to the nearest one-eighth of one percent. Advertised variable rates are the starting range of rates and may vary outside of that range over the life of the loan. Interest is charged starting when funds are sent to the school. With the Fixed and Deferred Repayment Options, the interest rate is higher than with the Interest Repayment Option and Unpaid Interest is added to the loan’s Current Principal at the end of the grace/separation period. To receive a 0.25 percentage point interest rate discount, the borrower or cosigner must enroll in auto debit through Sallie Mae. The discount applies only during active repayment for as long as the Current Amount Due or Designated Amount is successfully withdrawn from the authorized bank account each month. It may be suspended during forbearance or deferment. Advertised APRs are valid as of 6/23/2025. Loan amounts: For applications submitted directly to Sallie Mae, loan amount cannot exceed the cost of attendance less financial aid received, as certified by the school. Applications submitted to Sallie Mae through a partner website will be subject to a lower maximum loan request amount. Miscellaneous personal expenses (such as a laptop) may be included in the cost of attendance for students enrolled at least half-time. Examples of typical costs for a $10,000 Smart Option Student Loan with the most common fixed rate, fixed repayment option, 6-month separation period, and two disbursements: For a borrower with no prior loans and a 4-year in-school period, it works out to a 10.28% fixed APR, 51 payments of $25.00, 119 payments of $182.67 and one payment of $121.71, for a Total Loan Cost of $23,134.44. For a borrower with $20,000 in prior loans and a 2-year in-school period, it works out to a 10.78% fixed APR, 27 payments of $25.00, 179 payments of $132.53 and one payment of $40.35 for a total loan cost of $24,438.22. Loans that are subject to a $50 minimum principal and interest payment amount may receive a loan term that is less than 10 years. A variable APR may increase over the life of the loan. A fixed APR will not.
Although some borrowed for their own or a spouse’s education, in 2014 nearly 3 out of 4 reported borrowing for their descendents, according to the CFPB. Sixty-eight percent said they owed the money for a child’s or a grandchild’s education, while an additional 5% owed money for their own or a spouse’s education besides borrowing for kids or grandkids.
Many grandparents agree to co-sign a loan because they want to help their grandchildren and may not have the resources to help them pay for college, says Lori Trawinski, a certified financial planner and director of banking and finance for AARP Public Policy Institute. They often don’t understand they’re also legally responsible for the loan.
“People are surprised when you tell them that,” Trawinski says. “They didn’t realize they were on the hook.”
Even people who understand the risks of co-signing often take a bigger gamble than they realize. Many students who start college drop out. Without degrees, people tend to earn less and have higher unemployment rates, which can make it difficult to repay student debt. That’s why private lenders typically insist on co-signers for student loans.
Saying “no” means the grandkids can still go to college, but they’ll have to look for a less expensive education or use federal student loans, which don’t require co-signers.
If these warnings are too late, and a grandparent has already co-signed a loan, here are ways to contain potential damage:
Monitor your credit. Co-signers may not be notified if a payment is late. In fact, they may not be notified until the loan is in default and collections have begun. A dip in your credit scores may be your first indication there’s a problem.
Take over payments. If you can afford to do so, make the payments, then ask the student to reimburse you. That way you can ensure payments are made on time.
Ask to be released. Typically co-signers can be dropped from the loan after a certain number of on-time payments, Trawinski says. The student loan contract should have details about this or you can call the loan servicer.
If the loan goes to collections:
Explore settlement. You may be able to settle private student loan debt for less than the face amount if it’s clear you can’t pay. Be aware that settlement can do further damage to your credit scores.
Talk to a bankruptcy attorney. Student loans are extremely difficult to erase in bankruptcy court, but an attorney familiar with your state’s credit laws can advise you if you’re sued. If you don’t have any assets other than retirement funds, and your only income is from Social Security and pensions, you may be “judgment proof.” That means even if you’re sued, the creditor can’t collect anything.
That’s a grim scenario, but you’re better off than people who take out federal student loans. Those typically can’t be settled and the government has extraordinary collection powers, including garnishing Social Security checks. At last count, nearly 114,000 older Americans had to give up a portion of their Social Security to pay overdue federal student loans.
This article was written by NerdWallet and was originally published by The Associated Press.