With the rising costs of higher education, more and more people are turning to student loans to finance their college educations. Often, however, such loans require students to get co-signers for their loans. What exactly is a cosigner, and why do banks want students to have them? Test your understanding of this topic with this quiz.
Why might a college student need a co-signer for a student loan?
because he or she has no significant credit history
because he or she can't afford to pay for college without a loan
because students are only allowed to take out a portion of their loan themselves
If a student defaults on a loan for which he has a co-signer, who may be subject to legal action?
both the student and the co-signer
What is an added benefit of having a co-signer on a student loan, even if you have good credit?
lower interest rates
improved credit rating
shorter payment schedule
What type of student loans do not require co-signers?
loans under $10,000
loans for graduate school
Who will a bank accept as a co-signer for a student loan?
only the student's parents
any relative of the student
anyone who is willing to be a co-signer
When should you find a co-signer other than your parents for your student loan?
if they have bad credit
if they are already co-signers on an older sibling's loan
if they would be able to pay for your tuition without using a loan
Other than the liability itself, why else might people be hesitant to co-sign your student loan?
It could limit their ability to get other loans.
They may have to pay annual fees.
Student loans are often seen as socially unacceptable.
What makes a default on a student loan worse than most other loan defaults?
They cannot be dissolved via bankruptcy.
It was supposed to be less risky due to the co-signer.
It is the first major loan that most people get.
How long does it take for a negative event to be removed from your credit report?
What is special about a forbearance, as opposed to a delayed payment agreement on your loan?
The interest does not accrue during the forbearance period, as it does with a delayed payment.
It does not have a negative affect on your credit rating, while a delayed payment does.
There are no fees associated with a forbearance, as there is with a delayed payment.