Who will repay the loan?

Payment responsibility & cancellation

Some families want only the student to take out the loan; others may prefer that the parent take on the debt. Who’s responsible for paying which loan?

  • The student is the borrower for federal Direct Subsidized and Unsubsidized loans. These loans are in the student’s name and only the student is obligated to repay these loans. Parents are not responsible for repaying their children’s federal student loans.
  • Both the student and a credit-worthy cosigner are the borrowers for VSAC’s student loan and most student loans from private loan lenders. A cosigner shares responsibility with the student borrower for repaying the loan if the student isn’t able to make the loan payments.
  • The parent is the only borrower for federal Direct PLUS loans for parents, for VSAC’s parent loan, and most parent loans from private loan lenders. These loans are in the parent’s name and cannot be transferred to the student.

Ask these questions:

  • If a cosigner is needed, can that cosigner be released after meeting certain criteria or other conditions? If so, under what conditions?
  • Will the debt be cancelled if the borrower or student dies or becomes permanently disabled?
     

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Know before you sign!

  • Look for no or low origination fees and watch for hidden costs.
  • Ask for a full fee schedule up front.
  • Never sign without knowing what you might pay and determining all possible interest rates.

 

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