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Student loans could come with a college as cosigner
Rep. Scott Perry’s proposal would let colleges co-sign the federal student loans their students take out for a year. If a borrower defaults for 90 days, the school would start repaying the balance on a 10-year plan.
Taking out a federal student loan could eventually come with an unexpected second signature: the college itself.
In the U.S. House of Representatives, a proposal would create a system where colleges and universities can choose to cosign the federal Direct Loans their students receive. If a school joins the program for a given academic year, it would have to sign onto every new eligible loan its students take out during that period.
The change would begin July 1, 2026, when the Department of Education would be required to run what the bill calls an “institutional cosigner program.” The idea shifts colleges from institutions that simply enroll students who borrow to institutions that can formally share responsibility for those loans.
When a college shares the loan risk
Participation would be voluntary. A college could decide whether to join the program for a particular academic year, but it would first have to sign an agreement with the Secretary of Education committing the school to the program’s cosigner terms.
Once a college opts in, the commitment would apply across the board. The school could not pick and choose which students to support. Instead, it would have to cosign every new eligible federal Direct Loan issued to students enrolled at the institution during that academic year.
That arrangement ties the institution to the loan alongside the borrower, reflecting a structure where both parties appear on the agreement and carry responsibilities spelled out in federal student‑loan rules.
What changes on the loan paperwork
To make the system work, the federal government would revise the master promissory note, the standard document students sign when accepting federal loans. Beginning July 1, 2026, when the Education Secretary must run the program, that form would include terms describing both borrower and cosigner liability.
The updated paperwork would also include a place for an authorized college official to sign on behalf of the institution. In practical terms, the school’s name would appear on the loan agreement alongside the student borrower.
The proposal adds this institutional cosigner structure to the Higher Education Act of 1965, the main federal law governing federal student aid.
A different incentive for colleges