Colleges Co-Sign Student Loans for Lower Interest Rates and Shared Risk.
This law creates a program allowing colleges to voluntarily co-sign federal student loans for their students. Students benefit from lower interest rates on these loans because the risk is shared with the institution. If a student defaults, the college becomes responsible for repaying the debt, increasing institutional accountability.
Key points
Students receive lower interest rates on federal loans if their college chooses to co-sign them.
If a borrower defaults, the college must repay the loan, but the borrower's credit report still shows the default status.
Colleges participating in the program face a higher acceptable student loan default rate threshold (40% instead of 30%).
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