The Ultimate Co-signing Student Loans Quiz

By: HowStuffWorks.com Contributors

The Ultimate Co-signing Student Loans Quiz
Image: ©2009 Jupiterimages Corporation

About This Quiz

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
Due to the student's short credit history or a poor credit rating, a bank will be less willing to take the risk of the loan without the student having a co-signer on the loan.
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

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If a student defaults on a loan for which he has a co-signer, who may be subject to legal action?
the student
the co-signer
both the student and the co-signer
If you have a co-signer on a loan, that does not mean it is not your loan. You are still responsible, but the co-signer must pay it if you can't.

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What is an added benefit of having a co-signer on a student loan, even if you have good credit?
lower interest rates
A second person who is also responsible for the loan makes it less risky for the bank. Thus they are willing to give the loan with a lower interest rate.
improved credit rating
shorter payment schedule

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What type of student loans do not require co-signers?
government-backed loans
Federal student loans also have lower interest rates and more favorable repayment schedules.
loans under $10,000
loans for graduate school

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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
A co-signer is required only for financial reasons. The bank doesn't care who the person is, as long as they are willing to accept responsibility for the loan.

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When should you find a co-signer other than your parents for your student loan?
if they have bad credit
The whole point of getting a co-signer is to reduce the bank's risk on your loan, but if your parents have bad credit it could hurt, not help.
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

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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.
With the added debt of your student loan, it will bring higher interest rates and lower borrowing potential.
They may have to pay annual fees.
Student loans are often seen as socially unacceptable.

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What makes a default on a student loan worse than most other loan defaults?
They cannot be dissolved via bankruptcy.
Taxes, child support payments and student loans are all considered nondischargeable. Such debts remain valid even after bankruptcy.
It was supposed to be less risky due to the co-signer.
It is the first major loan that most people get.

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How long does it take for a negative event to be removed from your credit report?
seven years
Luckily, bad credit is fixable. If you improve your credit over time, your rating will further be improved when the past negative events drop off.
12 years
never

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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.
In times of financial hardship, you may be able to negotiate either a delayed payment agreement or a forbearance with your lender.
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.

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