Boston Student Loan Lawyer

I feel bad for cosigners, I really do. Most of the time, the co-signer is not the person actually enrolling in school. The cosigner is the student’s parent, spouse, boyfriend, girlfriend, cousin, or friend. The cosigner believes, genuinely, that she is helping the student go to school to get an education. All the cosigner is doing (says the conventional wisdom) is enabling the student to get that loan that will pay for tuition, so that the one they love can get ahead in life. And that loved one will, of course, get employed upon graduation and promises (promises!) to pay that loan back.

Here’s the basic rule for cosigners that many people just do not appreciate when they sign those super-easy-to-sign loan contracts: The cosigner is just as liable for the loan as the borrower. That’s worth repeating, so let me go ahead and say it again: The cosigner is just as liable for the loan as the borrower.

That means that if the student doesn’t pay the bill, you, the cosigner, have to. If the student doesn’t get that wonderful job after graduating and her loans are due and she can’t afford the payments, the lender will come after you. If she defaults on the loan, you default on the loan, too, and you’ll get to experience the joys of collection right along with the borrower. Most loans that have the option to cosign (or require it) are private loans, meaning you don’t get the benefits of federal loans (such as generous deferment and forbearance options and Income-Based Repayment). On the flip side, some loan contracts have provisions that will allow for adverse action against the borrower if the cosigner does something the lender doesn’t like–like file for bankruptcy, or die.

Everyone enters into a cosigning relationship with the best of intentions. But I have seen cosigned student loans destroy relationships, end marriages, and sever family ties more times than I care to count, simply because no one understood the consequences of cosigning when they took out the student loan. As with any situation, understand what you are doing before you agree to put your signature on some document. It may come back to bite you later, in a big, big way.

Different Federal student loans have different rights. The Perkins loan is an under-understood (and under-appreciated) federal loan that has a lot more rights and benefits than people might realize.

• It has a lower interest rate, generally at about 5%
• You don’t need a high credit score to get one
• You don’t need a co-signer to get one
• The government pays your interest while you’re in school
• It is serviced by your school, meaning you don’t have to deal with the large bureaucracy at the U.S. Department of Education
• It has a longer grace period (the “free” period after graduation) at nine months. That’s three months longer than Stafford loans, and Grad PLUS loans don’t even have a grace period.
• You can cancel the loan if you work in certain professions. This is, arguably, the biggest benefit of Perkins loans. For those with eligible occupations—for example, certain types of teachers, certain types of medical professionals, and certain types of lawyers—you can get your Perkins loan completed cancelled. Cancelled— as in, you don’t have to repay it.

If you have a Perkins loan, that’s great news. It is one of the best student loans you can have. Keep in mind that if you areconsidering consolidating your federal student loans and you want to include the Perkins loan, you will lose the post-graduation benefits of the Perkins loan–namely the extended grace period, the lower interest rate, and the cancellation rights. Make sure you know whether or not it makes sense to include your Perkins loan in the consolidation.