Cosigning a Student Loan: Pros & Cons

Student Loan Cosigner

Cosigning a Student Loan: Pros & Cons

The process of taking SAT/ACT exams, sending out handfuls of college applications, and eventually deciding on your school of choice is an emotional rollercoaster ride for even the most prepared and least anxious of students. At the very end of this arduous process, students (and parents!) find themselves at the very beginning of the next undertaking: financing a college education.

For lucky students, their parents or extended relatives are there to help. For many others, student loans are oftentimes the only viable option. As an immediate family member, extended relative, or family friend of someone pursuing a university-level education, you may be approached to cosign a student loan.

Much attention is given to student loans, however little attention is given to the impact of cosigning a student loan. For anyone that is considering a role as a cosigner, besides acknowledging the obvious benefit to the student borrower (i.e. they’ll be able to qualify for the loan!), it’s also necessary to know what’s at stake for you.

Who can cosign a student loan:
More often than not, a cosigner can be anyone with a strong credit history who has a willingness to help the student in question.

All lenders have their own cosigner requirements, however many institutions require cosigners to have a credit score of 670 or better and sufficient income to pay back the loan in the event the primary borrower defaults and is unable to repay. There are cases when lenders will go a step further to get a better sense of the cosigner’s overall stability – this can include reviewing the cosigner’s job history, how long they’ve lived in their home, and whether they’ve been in their job for at least a year.

Additionally, one of the least discussed (yet most important!) topics for deciding who should cosign a loan is the cosigner’s health. Many private lenders include language in the lending agreements that allow them to demand that the loan be paid in full upon the death of the cosigner. This is a point that deserves more attention considering that it’s not uncommon for grandparents (many who are older and may not be in their best health) to serve as cosigners.

What does it mean to cosign a student loan:
Personally, I’ve never encountered a student fresh out of high school who met the requirements to take out a student loan without a cosigner. This is likely due to their limited income and minimal (often non-existent) credit history. As the cosigner of a student loan, you are guaranteeing repayment of the debt. As cosigner, you hold a legal obligation to take over debt repayment in the event the borrower cannot keep up.

When banks lend money to borrowers for real estate in the form of a mortgage, the property itself serves as collateral. If the borrower is unable to keep up with their payments, the lender has peace of mind knowing it can cut its losses by seizing the property and selling it to a new buyer.

Considering that student loans are not backed by any physical collateral that can be seized and resold, a cosigner is a bank’s best option to recover an owed student debt.

Naturally, many students look towards their financially-stable family members to cosign student loans.

When parents or family friends of the borrower ask me for my thoughts on cosigning a student’s debt, I ask two questions:

  • Are you prepared for the responsibility to pay off this debt if the borrower cannot keep up with payments?
    • If no, DON’T cosign!
    • If yes, next question…
  • Do you, personally, have any large upcoming purchases/investments that will require borrowing a large sum of money (such as a new home purchase/mortgage or business loan)?
    • If yes, maybe don’t cosign. REASON: The cosigned loans will show up on your credit report and may complicate/restrict your ability to borrow.
    • If no, consider the borrower, your relationship with that person, and your confidence that they will be responsible in repaying the debt. If you accept the risks of being a cosigner and trust the borrower’s explicit commitment to repay the debt – go for it.

Benefits of cosigning a student loan:
For starters, the student borrowers are the primary beneficiaries of a cosigned loan. Cosigners allow students who would otherwise not qualify for a student loan to qualify and secure the funding needed to pursue their education. Additionally, if the cosigner is someone with stellar credit and strong income, the lender may take these facts into account and offer loans with lower, more competitive interest rates.

Many borrowers need cosigners for student loans due to not having much (if any) credit history. By having a student loan in their name and staying consistent on their monthly repayment, student borrowers are making significant (albeit unintentional) strides in establishing a personal credit history.

For cosigners, there’s little personal benefit to cosigning a loan (besides seeing a potential loved one pursue their dreams).

Drawbacks of cosigning a student loan:
A cosigner’s credit score will be impacted if the primary borrower misses a payment. Despite effectively serving as co-borrowers, cosigners rarely ever receive any formal notice that the primary borrower (i.e. the student) has missed payments. Unfortunately, missed payments are a common occurrence that frequently occur when borrowers are not setup for autopay or when a new loan servicer assumes the loan.

Another drawback to cosigning a loan is its impact on the cosigner’s debt-to-income ratio. As discussed before, the cosigned loan will show up on a cosigner’s credit report and may therefore reduce the cosigner’s ability to qualify for a personal loan or mortgage. Even if able to qualify for the loan, the increased debt-to-income ratio may result in the cosigner ending up with a less competitive interest rate.

In the event that the borrower is unable to repay the loan, collection agencies will look to the cosigner for payment. For most cosigners, this is the most significant drawback to cosigning a student loan and the one that must be most seriously considered when deciding to serve as a cosigner.

Even in the best of circumstances, a borrower and cosigner’s financial entanglement leaves the door wide open for relational stress.

How to decide whether to cosign a loan:
Making the final decision whether or not to cosign is personal. At a minimum, cosigners should have a sincere conversation with the prospective borrower to ensure the borrower understands the implications, and risk, to a) themselves and b) the cosigner.

It’s recommended that prospective cosigners also take an inventory of their own finances during this process. Be sure to consider your credit and to factor in whether or not any upcoming expenses will require a loan.

How to get a cosigner release:
Unfortunately, loan servicing companies never voluntarily let borrowers or cosigners know when they qualify for a cosigner release. Getting a cosigner release for a student loan typically requires that the borrower has graduated from school, has made at least 12 on-time payments, and has a sufficient credit score (credit score > 600) and income to repay the debt on their own. Additionally, it’s also typical that loan servicers will request the borrower (not the cosigner) to initiate the release process.

As a financial planning firm, we have clients who are the borrowers and others who are the cosigners. Regardless of borrower/cosigner status, we always work to have cosigners released as soon as possible.

  • Benefit of cosigner release to borrowers: Many private student loan promissory notes have provisions that allow the servicer to place the borrower in default (even if payments have been made on time) if the cosigner dies or files for bankruptcy. Releasing the cosigner as early as possible can prevent borrowers from experiencing surprise defaults and student loan balances automatically being due in full that are no fault of their own.
  • Benefit of cosigner release to cosigners: A parent or family member opts to cosign a student loan so that the borrower can pursue an advanced education. From the very beginning, it should be understood that releasing the cosigner should be a priority following the borrower’s graduation. Getting released as a cosigner means the former cosigner’s credit will no longer be impacted by missed payments and that the original borrower will be fully accountable for the debt.

The Consumer Federal Protection Bureau (CFPB) offers sample letter templates that borrowers/cosigners can send to servicers to request a consigner release.

For additional reading, our co-founder, Dennis McNamara, was featured in Forbes on this topic:

Webinar: Financial Crash Course For DOCTORS

Medical Professionals


wHealth Advisors is excited to announce a free webinar to help doctors (and those in training) get on a path towards financial independence.

Financial independence? Say what?

In a nutshell, financial independence means being financially secure enough that you continue working because you want to, not because you need to. Everyone’s situation is unique. Just as a good salary does not guarantee financial independence, mountains of student debt does not disqualify you.

For some, financial independence will mean making sacrifices. To others, it’s life as usual. In any case, it requires a vision, setting intentions, and having a roadmap that can evolve with you over time.

When: The Financial Crash Course for DOCTORS webinar will be given FOUR times (live) each Wednesday at 5pm (EDT) through the month of May. Seating is limited to 100 participants per webinar. We ask that you register using your work/school email – priority will be given to medical professionals.

What we’ll cover: Timely and timeless topics including:

  • COVID-19 Legislation: The impact on stimulus checks, student loans (including PSLF), and mortgages.
  • The NINE money mistakes doctors keep making
  • Fundamentals of Fiscal Fitness
  • Building a rock-solid financial foundation
  • The Juggle: Investing vs. student loan repayment
  • Physician mortgages: When they make sense (and when they don’t!)
  • Human capital: Investing in yourself

Why doctors? wHealth Advisors was founded on serving the medical community. While we can’t provide the resources they need most during this time (namely, PPE), we can offer what we know best: objective, evidenced-based financial guidance with no sales agenda or conflicts of interest.

The intended audience for this webinar includes those who are:

  • Medical/dental students
  • Interns/residents/fellows
  • Attendings or established docs that graduated medical/dental school within past 15 years

FIGS Giveaway: Following each webinar we will be randomly selecting a winner for a $25 FIGS gift card. Registering for the event is an automatic entry. Also – be sure to tag friends, classmates, and colleagues on our webinar-related Instagram posts (@whealthadvisors). More tags = more entries (limit = 10 total).

For any questions, please feel free to contact us at

Follow links below to register on preferred date:

May 6, 2020 5:00 PM Eastern Time (US and Canada)


May 13, 2020 5:00 PM Eastern Time (US and Canada)


May 20, 2020 5:00 PM Eastern Time (US and Canada)


May 27, 2020 5:00 PM Eastern Time (US and Canada)



Terms & Conditions

Additional Resources:

Student Loans:

  • Great resource and created to ensure that all consumers have access to fair, free, student loan advice and dispute resolution.
  • National Student Loan Data System – best place to go when creating an inventory of your Federal loans.
  • Best place to go when creating an inventory of your private student loans.
  • Affordable student loan refinancing/consolidation company
    • $248 for balances < $100k
    • $349 for balances $100k – $250k
    • $449 for balances over $250k

Stimulus Checks:

NAPFA-Advisor-Checklist: NAPFA Checklist for interviewing Financial Advisors

Five Fundamentals of Fiscal Fitness

Doctors Get Shafted When It Comes To Finances

Doctor Finance

Written by: Dennis McNamara

In a profession where it is expected that the practitioners embody the highest degrees of empathy, intellect, and work ethic – all for the benefit of others (and really, society at large) – why is it that doctors get the shaft when it comes to their finances?

Answering this question requires us to look at both the personal/financial circumstances many doctors face after graduating and the financial industry’s systemic shortcomings (or, outright inability) to provide fair service offerings to new doctors.

The Triple Whammy: Doctors Playing Catch-up

Let’s begin with the most significant financial circumstances that doctors are faced with, also known as the “Triple Whammy” – a term coined by author Dr. James M. Dahle MD of The White Coat Investor. The triple whammy is comprised of three factors that set doctors behind their non-doctor peers:

  • Significantly higher-than-average student loan balances
  • Delayed earnings due to schooling and residency/fellowship
  • Higher-than-average income tax brackets once finally earning

Dr. Dahle illustrates this uphill battle faced by doctors by describing a one-on-one race towards financial independence between a physician and their non-doctor peer:

If you compared the earnings/savings race between a physician and his college roommate to a 400-yard dash, the physician might be the faster runner, but he has to start fifty yards behind the starting line (student loans), he has to give his roommate a 15-second head start (lost earning years), and he has to run with a parachute tied to his waist (higher tax burden). It turns out the doctor has to be REALLY FAST (high earner with a very high savings rate) to still win.

Outside of the infrequent cases where medical school costs are paid for via family and/or scholarship, this triple whammy is inevitable for most doctors.


A fourth circumstance faced by doctors is burnout – we might as well amend the “Triple Whammy” to be a “Quadruple Whammy” – it’s that significant. In fact, a survey of 15,000 physicians cited in a Wall St. Journal article (Abbott, 2020) noted that 42% of the physicians surveyed across 29 specialties reported feeling some sense of burnout.

It is not uncommon for doctors to lose interest in working in medicine. This is understandable as doctors are constantly asked to do more and more with less and less. Over time, this overloading can have significant consequences. Besides the impact on personal well-being, patient care, and the health care system, burnout can derail doctors’ financial futures (decreased productivity, increased risk of malpractice, higher rates of divorce, early/forced retirement).

By acknowledging both the a) high likelihood and b) personal/financial consequences of burnout, doctors need to plan accordingly. By living intentionally during peak earning years, doctors can aggressively repay their student loans, build a nest egg, and craft a lifestyle that can be sustained if/when there’s ever the desire/need to shift into a lower paying career.

Being handcuffed to a job simply for the pay, despite feeling drained, disenchanted, and possibly depressed, is a not a recipe for personal fulfillment or success.

Perhaps at some point a doctor wants to teach, work part-time, or spend some years on the “mommy/daddy track.” Others may desire working in a location that doesn’t pay as well, volunteering more, or walking away from medicine as a whole. While money is not the key to happiness, it can be an empowering tool for pivoting toward a role that is more fulfilling.

Getting finances on the right track early in a medical career is a great defense to combatting burnout and can make nearly any conceivable career transition more realistic.

So, what is a newly minted doctor to do?

Our best recommendation is to begin with education, some personal finance 101. For starters, whether it’s student loans, retirement planning, or being tax-savvy with your hard-earned dollars, The White Coat Investor is a quick read and great primer for getting familiarized with personal finance. If interested in scratching beyond the surface, the has forums, articles, and vetted guest contributions that weigh-in and expound on additional topics. If reading and learning about finance feels like learning another language, that’s understandable – but do know that taking this time to understand the basics may be one of your better long-term investments.

Besides getting familiarized with finances, a newly minted doctor should invest in a professional consultation on their student loans. For many doctors just entering their residency, a student loan analysis may result in pursuing an income based repayment strategy and/or Public Service Loan Forgiveness. For doctors who have already completed their residency (or dentists who have shorter residencies), it may mean refinancing.

Questioning how much a student loan analysis could save you? Assuming you don’t qualify for any loan forgiveness, consider a basic refinancing scenario. If a doctor with $200k of student loan debt with an interest rate of 6.8% and a 10-year repayment schedule was able to refinance to a rate of 4.8%, their monthly payments would be reduced by $200. Over the 10 year repayment schedule this would save nearly $24,000 in interest payments.

The Financial Industry’s Shortcomings: Doctor beware!

This brings us to the next obstacle for doctors – the finance and insurance industries. Bill Bernstein, author of The Intelligent Asset Allocator, once noted, “If you assume that every financial professional you interact with is a hardened criminal, you’ll do okay.” As a financial planner, and it pains me to say, Bill’s quote is accurate. All investors, not just doctors, should approach the financial and insurance industries with antennas up. In many fields there is a code of conduct or standard of ethics to adhere to. In medicine, the common example of this is the Hippocratic Oath. Thought to have originated in c.a. 500 BCE, the Hippocratic Oath was a response to the charlatans who posed as doctors to swindle patients and make a quick buck. Though many medical institutions have moved away from the original Hippocratic Oath, many modern versions maintain the same theme: putting patients’ best interests first.

When it comes to the financial industry, like Bernstein’s quote alludes, Caveat Emptor – “let the buyer beware.” In a field saturated with mutual fund salespeople, insurance salespeople, and stockbrokers – how does one find a financial professional they can trust?

The F-word: “Fiduciary”

Similar to the Hippocratic Oath, the financial professional that you choose to work with should be one who, at a minimum, adheres to the National Association of Personal Financial Advisor’s (NAPFA) fiduciary oath. According to NAPFA, this oath means that the professional shall:

  • Always act in good faith and with candor.
  • Be proactive in disclosing any conflicts of interest that may impact the client.
  • Not accept any referral fees or compensation contingent upon the purchase or sale of a financial product.

To know for sure whether the financial professional you’re working with, or the person that you’re interviewing to hire, is a fiduciary, ask that they put in writing and sign a statement that they will always put your financial interests ahead of their own and the firm they work for. If they are unwilling (or “unable”) to sign this, they are not a true fiduciary.

NOTE: Financial professionals are legally required to act as a fiduciary in ERISA plans such as 401ks, 403bs, IRAs, and pensions. So, if a financial advisor tells you, “Yes, of course, I act as a fiduciary in insert ERISA retirement plan” just know that this is nothing special. You want a professional that always acts as a fiduciary.

However, despite adhering to heightened code of ethics, many of the advisors that you can search for on charge their clients by a percentage of the assets under management (or, AUM). That is, if you have $500,000 of investable assets and are seeking the advisor to manage those assets, you may be charged 1% (i.e. $5,000), on $1 million of investable assets you might pay that same 1%, or $10,000. These fees also do not account for the underlying expense ratios of the investments you’ll be placed in (oftentimes as high as another 1%).

Hiring an advisor when you have negative net worth

While we could take time to debate whether or not the AUM fee structure holds up under deeper ethical scrutiny when compared to a fixed/flat-fee which is not tied to investable assets (hint: it doesn’t), let’s get back to the point! For most doctors, even if they do their homework on and find an advisor that acts as a fiduciary, will a young doctor meet the asset minimums to qualify as a client? Perhaps, but probably not.

When it comes to medical/dental school, roughly 80% of students will take on loans to pay for tuition. Out of those who borrow, the largest cohort (27%) take on between $200-300k of student debt (not including any undergraduate debt). Despite earning money during residency/fellowship, it’s likely that most doctors will become an attending while still having a negative net worth. That is, they may be a great saver and were able to accumulate $50,000 of cash/investments during residency, however they still have $200,000 of student debt – or a negative net worth of $150,000. For an advisor that charges their fee as a percentage of the assets they’re managing, there is no way to be compensated for working with a young doctor.

Here’s when the charlatans of the finance and insurance industries begin rearing their ugly heads. When you hear that they’ll provide you anything for “free” – RUN AWAY!

Some of the worst places to get financial advice:

  • Unsolicited emails
  • Stock-picking internet forums
  • Your TV (turn off Jim Cramer!)
  • Your insurance agent
  • Your local brokerage shop (Morgan Stanley, Merrill Lynch, Edward Jones, UBS etc.)
  • Your bank or credit union

With a negative net worth and no (or minimal) assets to manage, the most unsavory financial and insurance reps capitalize on the opportunity to make a one-time sale of a product that can earn them a commission, score them a kickback, or help them hit a quota (behind the curtain: “one more sale and I win a trip to the Bahamas!”).

One more time for the people in back: DOCTOR BEWARE!

Final Thoughts: Who should doctors work with?

The top qualities that a doctor should consider in a financial planner are as follows:

  • Fiduciary: As discussed – someone legally sworn and obligated to always place your interests ahead of their own.
  • CFP® Credential: Certified Financial Planner™ marks are the gold standard. Advisors are required to complete extensive coursework and to pass a board administered exam.
  • Fee-only: Advisor is compensated only by the client and never earns commissions for product sales or referrals. NOTE: Fee-only and fee-based are not the same!
  • Independent: Not affiliated with or hired by any brokerage firm, bank, or insurance company.

Unfortunately, it can sometimes be a challenge finding advisors that check off all four of these. Luckily, there are sites such as and that offer search functions based on your location. As the name suggests, offers listings of fee-only advisors. On, the website for the Alliance of Comprehensive Planners (or, ACP), you can also search for advisors based on geography. While both organizations are reputable and their advisors meet most (often all) of the aforementioned qualities, it’s worth exploring ACP if you want an advisor who offers a broader scope of services (i.e. navigating student loans, starting a solo-401k, preparing you annual taxes etc.).

At wHealth Advisors, working with medical professionals is personal. Having a wife, a brother-in-law, and numerous relatives that have pursued the path of medicine we recognize the nuances of the journey, the challenges, and the endless opportunities – all while upholding the industry’s highest standards. The Ongoing Financial Planning of our website highlights our offerings for doctors in all stages of their careers ranging from residents to retirees. For those still pursuing the search for an advisor: Godspeed, good luck, and we hope to hear from you.


Podcast: Not A Medical Marvel (feat. Dennis McNamara CFP®)

Abbott, B. (2020). Physician Burnout is Widespread, Especially Those in Midcareer. The Wall Street Journal.

For any questions or clarifications please feel free to contact us at