Ain’t this time of year grand?
There’s a lot that families can do to tame the cost of higher education, starting with filing the Free Application for Federal Student Aid (FAFSA) which determines a student’s eligibility for federal aid, applying for scholarships and grants which don’t need to be repaid, and considering the cost of attendance when comparing college acceptance offers.
But for some college students, there is a funding gap between their federal student aid–which includes federal student loans–and their total cost of attendance. If students or their parents can’t afford to pay the difference out of pocket, just over 9% turn to private student loans. And among undergraduate students, 92.45% of those private student loans are cosigned–often by Mom or Dad.
Unfortunately, cosigning your kid’s private student loan can put your credit score, your retirement, and even your relationship with your child at risk.
Here’s what you need to know about the unexamined dangers of cosigning your child’s private student loan.
Student loan debt by the numbers
There are 42.8 million federal student loan borrowers who owe a total loan balance of $1.693 trillion, which represents 90.9% of all student loan debt. Private student loans make up only 9.13% of all student loan debt, for a total loan balance of $133.4 billion.