While an increased number of parents who served as cosigners for private student loans has admitted to experiencing negative results such as poor credit scores, a majority said they would do it all over again, according to a new study by LendEDU.
After analyzing survey results from 850 parents who cosigned private student loans and comparing them to results from the same survey last year, LendEDU found around a 10 percent increase in the number of parents, from 56 percent to 62 percent, who believed that their credit score was reduced due to serving as a cosigner.
The study’s author, research analyst Mike Brown, wrote that the most likely cause for a lower score is a late payment, which is supported by the survey’s finding that 43 percent of parents admitted that their child was late on a payment, which they believed impacted their score— a 7 percent jump from last year.
Brown also found a 17 percent increase in the number of parents who believed that cosigning hurt their ability to qualify for a mortgage or an auto loan.
“The domino effect of a borrower’s late payment on a cosigned loan can be consequential,” Brown wrote. “A late payment brings on a lowered credit score, and a lowered credit score can make it extremely difficult for cosigners to qualify for other financial products.”
Yet despite the risks involved in cosigning a private student loan, which have become a reality for an increased number of parents, a majority of respondents in the survey from both this year and last year said that they did not regret their decision. In fact, 65 percent of parents said they would do it again.
Brown also found that parents were doing even more than what their child asked of them when it came to making payments. While 65 percent of parents said that their child came to them for assistance on a monthly payment, 74 percent said that they helped their child pay off a loan.
“For a large majority of parents, providing their children with a better life than theirs remains paramount, even if that means making sacrifices,” Brown wrote. “...Parents in the U.S. are more willing to take a hit in their own finances if it means that their children can get a quality college education with minimal student loan-related stress.”
Publication Date: 2/12/2018