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Last update: August 14, 2024
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Uncover the crucial role of borrowers in private student loans. Learn about their responsibilities, rights, and impact on loan terms. Essential reading for both students and co-signers.
By Brian Flaherty, B.A. Economics
Edited by Rachel Lauren, B.A. in Business and Political Economy
Learn more about our editorial standards
By Brian Flaherty, B.A. Economics
Edited by Rachel Lauren, B.A. in Business and Political Economy
Learn more about our editorial standards
A huge majority of students are strapped with student loans, yet only a handful truly grasp the nuances of the financial terminology associated with their loans. For example, who exactly is the borrower? Is it the student? Is it the student's parents? Let's explain so you fully understand your student loans.
In the context of student loans, the borrower can be either the student or the parent, depending on the type of loan. For federal student loans like Direct Subsidized and Unsubsidized Loans in the United States, the student is the borrower. Ultimately, the borrower is the party legally responsible for repaying the loan and may face different tax implications based on their role.
The specifics can vary by country, but generally, the pattern holds: Student loans can either be borrowed by the student or the parents, depending on the terms and conditions of the loan product.
Understanding who the borrower is for a particular type of student loan is crucial for financial planning and understanding who bears the legal responsibility for repaying the loan.
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The borrower of a student loan can either be the student or the parent, depending on the type of loan and the lending institution's terms. Federal loans like Direct Subsidized and Unsubsidized Loans in the United States typically make the student the borrower, while Parent PLUS Loans designate the parent as the borrower. Private student loans can also have variations, including students or parents as borrowers, depending on the specific loan product.
Yes, many student loans, even when the primary borrower is the student, often require a cosigner. The cosigner takes on the legal responsibility for the loan if the student is unable to make payments. This is typically someone with a good credit history and is often a parent or a trusted adult.
The borrower is legally responsible for repaying the loan, while in cases where there is a cosigner, both parties share the legal responsibility for repayment. It's crucial to understand these legal obligations and responsibilities when taking out a student loan.
Depending on your jurisdiction, there may be tax advantages or disadvantages for both the borrower and the cosigner. It's advisable to consult a tax professional to fully understand the tax implications related to your specific student loan.
In summary, the borrower of a student loan can either be the student or the parent, depending on the type of loan and the terms set by the lending institution. Knowing your role is crucial for understanding who holds the legal and financial responsibility for repayment, as well as for planning any potential tax implications.
Brian Flaherty
Brian is a graduate of the University of Virginia where he earned a B.A. in Economics. After graduation, Brian spent four years working working at a wealth management firm advising high-net-worth investors and institutions. During his time there, he passed the rigorous Series 65 exam and rose to a high-level strategy position.
Rachel Lauren
Rachel Lauren is the co-founder and COO of Debbie, a tech startup that offers an app to help people pay off their credit card debt for good through rewards and behavioral psychology. She was previously a venture capital investor at BDMI, as well as an equity research analyst at Credit Suisse.
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