Unsolicited advice: Cosigning a loan

Sallie Mae offers a lower interest rate for students with a cosigner, or someone with a longer financial history and sometimes better credit. Usually a parent.
A cosigner is someone who agrees to be legally responsible for a borrower’s debt in case of default, bankruptcy or death. It’s actually quite a big responsibility.
And student loans are different than other loans, because they still need to be paid off even if a borrower declares bankruptcy, and a cosigner can still be responsible for them if the borrower dies.

On my loans, my dad is my cosigner. He is also the cosigner of my sister’s loans. This puts him at a huge financial risk if something tragic happens to us.

So what he did was take out term-life insurance policies from All State for like, $12/month, for the amount of our loans. That way, if either she or I die, the policies will activate and he will have enough money to pay off the loans. And when we pay off the loans, he can cancel to policies or let us start to pay for our own life insurance (if we have dependents, etc).

Kind of smart guy, my dad.

Some more information: here and here

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~ by khaslett on March 11, 2010.

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