Student Loans

Question 6 • SEPHS - BUS 240 - Personal Finance (Summer)

Why do most student loans involve a co-signer?

Answer

Most students won’t be able to afford paying for their loans, and leave that responsibility to their co-signers.

Co-signers were most likely college students themselves and understand what it is like to be a college student.

Most students aren’t responsible enough to know much about any type of loans, so a co-signer is there to make sure everything is secure.

Most students are young enough not to have much of a credit score or credit history, so a second party such as a parent or guardian can establish security of payment.

Explanation

Many students are young and have little or no credit history, so lenders may not have enough information to judge whether they will repay a loan. A co-signer, often a parent or guardian with an established credit history, provides additional assurance and agrees to share responsibility for repayment. That matches choice D; a co-signer is not included simply because students are presumed irresponsible or unable to pay.

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