SPRINGFIELD –Cosigners to private student loans may find themselves in a difficult financial position if they are unaware the student they signed for is behind on his or her payments.  These cosigners will be better protected under legislation sponsored by State Senator Laura Fine. Under this bill, they will be alerted if student borrowers are not paying off their loan and will have more options before incurring the borrower’s debt.

“Cosigning a student loan may seem like a formality, but can quickly become a massive financial responsibility,” said Fine (D-Glenview). “By requiring more transparency between the primary borrower and cosigner on the borrower’s ability to pay throughout the life of the loan, cosigners will have more options if the student falls behind on payments.”

Before this initiative, private education loan lenders were not required to update the cosigners on the borrower’s progress repaying the loan. This led many cosigners to be blindsided by the sudden financial responsibility of paying off the borrower’s debt, as well as the negative impact of the loan on their own credit score and limited refinancing options.

To address these issues, this measure would ensure cosigners receive loan statements at least every 3 months during the time the borrower is enrolled at an institution of higher education, keeping them informed of the borrower’s progress repaying their loan. The cosigner will also have access to all records available to the borrower, information on refinancing plans, and established eligibility requirements if they want to be released from their obligations as cosigner. These requirements will clear up confusion between cosigners and borrowers, and ideally result in less financial strain on all parties involved with transparent communication. 

Senate Bill 86 passed the Senate on Friday. It now goes to the Senate floor for debate.