What to Know Before You Co-Sign for a Student Loan

Supporting a Student’s Future—Without Jeopardizing Your Own

For many families, education is one of the most meaningful investments they can make. But with rising tuition costs, students often need financial assistance to reach their goals, and sometimes that means asking a parent, grandparent, or trusted adult to co-sign a student loan.

At Casey State Bank, we understand the desire to help a loved one succeed. Before you co-sign, here’s what you need to know to protect your finances while supporting their future.

1. What Does It Mean to Co-Sign a Loan?

When you co-sign a student loan, you agree to take equal responsibility for the debt. If the student borrower can’t make payments for any reason—such as unemployment or financial hardship—you are legally required to step in and pay.

It’s not just a favor—it’s a financial commitment.

2. It Can Affect Your Credit

Because co-signed loans appear on your credit report, any missed payments or defaults can hurt your credit score. Even if payments are made on time, the loan amount will count toward your overall debt-to-income ratio, which could impact your ability to qualify for future loans or credit.

3. There’s Often No Easy Way Out

Many private lenders do not offer a co-signer release option until several years of consistent, on-time payments are made, and even then, approval isn’t guaranteed. That means your name could be tied to the loan for years, possibly until it’s fully repaid.

Before signing, ask the lender: Does this loan include a co-signer release policy? If so, what are the requirements?

4. Consider the Student’s Financial Readiness

Before co-signing, take a realistic look at the student’s academic path, future earning potential, and their plan to repay the loan. Are they enrolled in a program with strong job placement? Do they have a budget or repayment strategy in place?

Having an honest conversation upfront can prevent future tension and financial strain for both of you.

5. Explore Alternatives First

Before co-signing, encourage the student to apply for:

• Federal student aid (FAFSA)
• Scholarships and grants
• Work-study programs
• Smaller loan amounts or lower-cost education options

Federal student loans typically don’t require a co-signer and often come with more flexible repayment options.

6. Know the Risks—But Also the Rewards

Co-signing isn’t always a bad idea. In many cases, it helps students access better loan terms or qualify for a loan they otherwise wouldn’t get. It can be a way to support their dreams and show confidence in their future.

But it’s essential to make the decision with eyes wide open, knowing both the potential benefits and the long-term responsibilities.

Let’s Talk Through Your Options

At Casey State Bank, we’re here to help families navigate big financial decisions like this one. Whether you’re weighing the pros and cons or exploring student loan solutions, we offer guidance you can trust—and support you can count on.

Reach out to one of our local lenders today, stop by your local branch, or contact us. We’re proud to be your financial partner today and for the future!