My aunt cosigned my student loans, but 12 years later I'm determined never to do the same

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The author is not pictured.

• My financial aid couldn't cover the cost of my college tuition, and my parents couldn't cosign a private student loan to make up the rest.
• My aunt stepped in and cosigned an $18,000 loan, for which I'll always be extremely grateful.
• However, I'll never again ask for a cosigner or cosign someone else's loan. I've seen firsthand how complicated and tricky it can be, and I won't put myself or someone else in that position again.
• Read more personal finance coverage.

During my freshman year of college there was a five-figure gap between what my financial aid covered and what tuition cost. In hindsight, I should have seen that bill and run to my nearest community college, since the four-year university I was planning to attend was clearly unaffordable.

Instead, I turned to private student loans to cover the cost. As a broke 18-year-old with no official work history, I couldn't get approved for a private student loan on my own. My parents couldn't either because of their credit histories. I was panicked, until an aunt offered to cosign an $18,000 loan.

I was incredibly grateful at the time, and still am today. That loan allowed me to get started in a journalism program that kickstarted my career. However, in the 12 years since that loan was dispensed I've learned a lot about cosigning.

I recently refinanced the loan in my own name and I'll never ask for a cosigner again. And, although I am incredibly grateful for the gift my aunt gave me, I'll never be a cosigner myself. Here's why:

Cosigning affects you, even if everything goes well

Most people believe that a cosigner is merely a backup payee. If the primary borrow doesn't pay, the lender can go to the cosigner, who is also responsible for the loan. If you think about cosigning this way, there's little risk, as long as you believe the primary borrower will hold up their end of the deal.

However, that's not the full picture. When you cosign a loan, it shows up on your credit report. Lenders consider cosigned debt just the same as they would consider debt on which you are the primary borrower. It affects your all-important debt-to-income ratio, which can limit your ability to get additional credit in the future. That means that even if the person you cosigned for is doing everything right, their loan can still change your financial situation.

This came up for us when my aunt's kids were heading to college themselves. She wanted to take out additional loans for their education, but wasn't able to in part because of the monthly payment on my loan. As you might imagine, that put us in an awkward situation.

Cosigning can change your relationships

At that point, my aunt asked me to refinance the loan in my own name. However, I was only a few years into launching my business, and I couldn't get approved for a private, unsecured loan on my own. That was frustrating for everyone: I was irritated that my aunt couldn't understand that I would refinance just as soon as I was able. She couldn't understand why I hadn't considered this sooner.

There were a few tense phone calls involved. The tension even seeped into family events, where I wondered if she was seeing the loan every time she looked at me. When I bought a house I worried that she was angry I was spending money on that, rather than paying down the loan.

We were lucky that we had an underlying respect and a solid relationship that wasn't ruined by intertwining our finances. My aunt knew I had always meticulously made payments on time. She understood that, as I bluntly put it, I wanted her off the loan just as badly as she wanted to be off. I knew that my choices were affecting her finances. Despite that, there was still a lot of strife, and I saw clearly how a cosigning relationship can quickly go sour.

There's a lot of fine print

If you do opt to cosign a loan, read the fine print carefully. When my aunt first requested to get off the loan, I called my lender. Since I had never made a late payment in 10 years, I figured it would be no problem to remove the cosigner. However, years before, I had deferred payments temporarily after my husband lost his job while I was pregnant. That disqualified me from every having my cosigner removed, something the lender didn't tell me (or my aunt) at the time.

In hindsight, I should have spoken with my aunt about making the decision to defer payments for a few months. Unfortunately I had no idea deferment would have a long-term impact. If I were ever to consider cosigning for some reason in the future I would ensure that the primary borrower and I have an open dialogue about every decision with the loan, no matter how small it may seem.

Cosigning ignores the financial reality

This point is hard to make, because I've been in the embarrassing and frustrating position of needing credit and not being able to get it. However, if the bank is saying no to a borrower, there's a reason. That person doesn't make enough money or have a long enough credit history for the bank to have faith that they can afford the loan payment. If the professionals at the bank won't take a risk, why would you?

I would have been devastated at 18 if I couldn't secure a loan for college. However, at 31 I truly believe I may have been better off in the long-term without that loan. My student loan as been affecting my financial decisions and family relationships for more than a decade. I wouldn't wish that on anyone else, and certainly won't be part of making that happen.

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