endorsing student loan

[katcos]

I have been asked to endorse a student loan. Does anyone know if I was to endorse the loan will it show up on my credit report and affect my score or only do so if the cosigner was ti default?

[SCF]

By endorse, do you mean co-sign?

Co-signing on a loan can have a very serious impact on your credit.  The loan will generally be reported on your credit report, which can affect your debt-to-income ratio if you apply for a loan.  This also means that any late payments or default will have the same impact on your credit as it does the primary borrower.

When you co-sign, you agree to repay the loan in the event the primary borrower cannot or will not do so.  If you aren't fully prepared to repay the loan in full according to the terms outlined by the lender, I would not co-sign.  And even if you could repay it, consider if you would feel comfortable giving the primary borrower that much money as a gift, under duress, because they just can't or won't own up to their responsiblities - because there is a very real chance you'll have to do that in order to protect yourself if they stop making payments.

Personally, I would offer the borrower my help in finding another solution, or even some direct financial support, rather than putting my credit (and possibly my sanity) on the line into the bargain by co-signing.

[katcos]

From my understanding it's a parent PLUS.. the parent would be co signing and I would be needed to endorse her. My financial responsibility would come into play if the cosigner, the parent, was to default on the loan. I was told that when asked the bank said that it won't show up on my credit unless in the case of a default so I'm trying to figure out if this is really the case or not. I'm not worried about the person defaulting but I don't want something else on my credit report.

[SCF]

Parent Plus loans are taken out directly by the parent - the student bears no legal responsibility for the debt, although the student and their parent may have private arrangements.  Unlike federal loans offered directly to the student, they do require a credit check.  If they need you to endorse the loan, they have some serious credit issues, which should make you think carefully about offering your own credit standing as a guarentee that they (or you) will repay.

If you don't endorse the loan, the student should be offered the balance of their required aid as unsubsidized loans, which may actually be more favorable.  Unsub loans currently have a lower interest rate, plus they offer flexible repayment plans.  Personally, I would encourage the parent to visit with the child and their financial aid office to secure the additional unsub loans, and then make a private commitment to help the child repay those loans once they graduate.

I honestly can't find anything which specifies clearly if the loan will be reported on your credit as it would be with a private student loan or other debt that you co-sign, but be aware that you might still be required to disclose your obligation in certain situations even if it doesn't appear on your report, especially if you plan to apply for a mortgage.

You can browse these forums to see that none of us advocate for any solution BUT co-signing because we're mean, or don't trust our family and friends.  It's just that it is impossible to predict the future and the consequences can be dire, especially with federal student loans in the balance, because they will never go away until they are paid off.