Co-signing a student loan might feel like a short-term favor, but for many people it becomes a long-term financial risk. According to higher education expert Mark Kantrowitz, more than 90% of private student loans require a co-signer, meaning two people are equally responsible for the debt.

“A co-signer is often required for a private student loan because the student borrower has a thin or non-existent credit history,” Kantrowitz told CNBC (1). “They are an unproven asset.”

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That obligation doesn’t go away until the loan is repaid, and it doesn’t matter who benefited from the loan.

Imagine Jessica, a 28-year-old who agreed to co-sign her friend’s private student loans when she was 22 years old. At the time, she was newly on her own and trying to help someone she trusted. Her friend needed a co-signer to finish her degree and promised to stay current on payments. She also told Jessica she’d refinance the loan as soon as she could. For years, everything seemed fine.

But Jessica recently learned the loan is several months past due and her friend has stopped paying — and stopped responding to her messages. The lender has begun calling Jessica directly, warning that they will soon report the late payments to the credit bureaus.

Taking over the loan payments could undo years of work Jessica has put in digging herself out of credit card debt, but letting it default could damage her credit. What can she do to remain financially healthy?

Jessica’s situation illustrates a risk millions of Americans take, often without fully understanding the consequences. Private student loans are especially risky for co-signers because they lack many of the protections built into federal loans. There are typically no income-driven repayment plans and few forgiveness options. Even when co-signer release programs exist, they are rarely granted, and generally require the main borrower’s approval (2).

“Lenders are generally averse to removing a cosigner,” Dean Kaplan, president of The Kaplan Group, told U.S. News.

“If they let the cosigner off and then the borrower defaults, the lender is facing a greater financial loss than if they had not released the cosigner (2).”

The fallout can be severe. An AARP survey found that nearly half of borrowers aged 50 and older who co-signed a private student loan ultimately made payments themselves (3). In some cases, co-signers have faced aggressive collection agencies, lawsuits, wage garnishment, frozen bank accounts or property liens from debt they didn’t personally use but are still responsible for.

And default isn’t always caused by irresponsibility. Illness, disability, job loss or family emergencies can lead even well-intentioned borrowers to fall behind. When that happens, their co-signers become liable for the debt.

In one case reported by CNBC, a private lender excused a 53-year-old woman from repayment when she became disabled, but then transferred the entire balance to her elderly mother, who had co-signed years earlier and lived on her limited Social Security payments (1). The daughter is now worried the loan company will take her mother's house.

Once a loan goes delinquent, co-signers have few options. You must either pay the debt or take the hit to your credit. Depending on your state and the terms of the loan, you may be able to pay off the debt and then sue the original borrower in civil court. However, a lawsuit comes with its own costs.

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Scenarios like this highlight why co-signing is less about generosity and more about risk assessment. In general, most financial experts caution against co-signing at all. Remember that student loan repayment often spans decades, and a lot can change in that time. If you are considering co-signing on any type of loan, consider these factors:

Before co-signing, it’s worth considering whether you could comfortably afford the loan yourself. If you can't or it would cause undue hardship, don't co-sign.

Some co-signers assume they’ll be alerted if a borrower falls behind. That isn’t always guaranteed. Setting expectations with the other borrower, such as providing notice of late payments or shared access to the loan account, can reduce unpleasant surprises.

Trust alone isn’t enough. Understanding the borrower’s income stability, job prospects, and overall financial situation can help you assess the real risk. If they are uncomfortable being transparent, don't sign.

Many borrowers promise to refinance and remove a co-signer later. In practice, refinancing requires strong credit and stable income, which isn't always possible. Also, lenders often have broad leeway in deciding whether to offer a refinance.

The takeaway here is simple: co-signing means tying your financial future to someone else’s ability and willingness to repay debt. And it's not always about trust, since a borrower's disability or death could leave you on the hook. Avoid co-signing on loans unless you are comfortable paying the debt yourself.

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CNBC (1); U.S. News (2); AARP (3)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.