Advertiser Disclosure

Last update: March 7, 2024

4 minutes read

Who is a Borrower? A Guide to Rights and Responsibilities

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


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.

Key takeaways

  • Transferring schools doesn't mean your loans "transfer" with you
  • Dropping out has financial consequences, including the start of your loan grace period
  • Communicating with your loan servicer is essential to navigate potential challenges

    Who is the borrower for a student loan?

    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.

    Federal student loans (United States)

    1. Direct Subsidized and Unsubsidized Loans: The student is the borrower. These loans are made directly to the student, who is responsible for repaying the loan amount plus interest.
    2. Direct PLUS Loans for graduate or professional students: Again, the student is the borrower. These are available for students attending graduate school and are not based on financial need.
    3. Parent PLUS Loans: In this case, the parent is the borrower, not the student. Parents can borrow money to cover education expenses for a dependent undergraduate student. The parent is responsible for repaying the loan.

    Private student loans

    1. Student as borrower: Private student loans can be made directly to the student, who is responsible for repayment. However, given the student's limited credit history, many private loans require a cosigner.
    2. Parent as borrower: Some private loan products are specifically designed for parents who wish to borrow on behalf of their children.

    Other countries

    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.

    Additional considerations

    • Cosigners: Even when the student is the primary borrower, many loans require a cosigner who is responsible for the loan if the student fails to make payments. The cosigner is often a parent but could be any adult with a good credit history.
    • Legal responsibilities: Whoever is the borrower is legally responsible for repaying the loan. In cases where there's a cosigner, both parties are legally responsible.
    • Tax implications: Depending on the jurisdiction, there might be tax advantages or disadvantages for the borrower and/or the cosigner, so it's advisable to consult a tax professional.

    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.

    How TuitionHero can help

    We at TuitionHero understand the rollercoaster that is student loans and college finances. It's not just about borrowing and repaying; it's about making informed, educated decisions every step of the way - that's where we step in.

    We're more than just a financial website. We're your ally, your partner in navigating the complexities of Private Student Loans. Thinking of refinancing? We've got you. Looking for scholarships to ease the financial burden? Yep, we handle that too. And hey, if you're looking to make some smart financial decisions with credit cards, guess what? We've got the expertise.

    Now, tying it back to the heart of this post, managing student loans and making informed decisions can feel overwhelming. But with our wide range of services, our goal is to simplify the process, offering you a tailored roadmap to financial success.

    Frequently asked questions (FAQ)

    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.

    Final thoughts

    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.


    Author

    Brian Flaherty avatar

    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.

    Editor

    Rachel Lauren avatar

    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.

    At TuitionHero, we're not just passionate about our work - we take immense pride in it. Our dedicated team of writers diligently follows strict editorial standards, ensuring that every piece of content we publish is accurate, current, and highly valuable. We don't just strive for quality; we aim for excellence.


    Related posts

    While you're at it, here are some other college finance-related blog posts you might be interested in.

    7 minutes read

    Navigate student loan eligibility with our expert guidance on citizenship status.

    Learn More

    8 minutes read

    Learn the key qualifications for securing private student loans: A comprehensive guide on necessary credit scores, income stability, and accredited school enrollment requirements.

    Learn More

    7 minutes read

    Do you truly understand the difference between an asset a liability? Let's take a second to understand what assets are and how vital they are for shaping your financial future.

    Learn More


    Shop and compare student financing options - 100% free!

    Always free, always fast

    TuitionHero is 100% free to use. Here, you can instantly view and compare multiple top lenders side-by-side.

    Won’t affect credit score

    Don’t worry – checking your rates with TuitionHero never impacts your credit score!

    Safe and secure

    We take your information's security seriously. We apply industry best practices to ensure your data is safe.

    Finished scrolling? Start saving & find your private student loan rate today

    It’s 100% free
    Won’t affect credit score
    Compare rates from multiple lenders