Co-signing on campus?

Credit card issuers and private student lenders have long had a presence at America’s colleges and universities. In fact, there are more than 1,000 special marketing agreements between credit card issuers and schools. But due to changes in the law and marketplace, more students are finding that they may need a co-signer to qualify for a credit card or a private student loan.

Many people assume that a student’s co-signer is a parent, but that isn’t necessarily true. So, if one of your classmates asks you to co-sign a credit card application or a private student loan, should you do it?

While it seems like an easy way to help out a friend, co-signing any loan application is a serious contract and you’re on the hook if your friend doesn’t pay up. Not paying can tarnish your credit history, and you might have to worry about:

Hurting your job prospects. The Society for Human Resources Management found that 60 percent of companies ran credit checks on job applicants (PowerPoint presentation). If you are a cosigner, your friend’s money troubles could cause an employer to hesitate in making you an offer.

Not getting an apartment lease. Many landlords run credit checks to see if you have any problems paying what you promised. Co-signing is one of those promises.

Having debt collectors come after you. If your friend runs up a large credit card bill and cannot pay, you are also responsible for the debt. A debt collector can target you, since you’ve guaranteed that the debt will be paid.

So, if you’re asked by friends to co-sign a credit card or student loan application, how can you say no while still helping them out?

If they simply want the convenience of using a card instead of cash to pay for daily expenses and doesn’t need to borrow, suggest a debit card, which can serve the same purpose.

If your friend needs a credit card to borrow, this is a completely different situation. According to a recent study , 21 percent of students had a credit card balance between $3,000 and $7,000, and a significant portion of that debt was for educational expenses.

When borrowing to cover the costs of going to college, a credit card or private student loan can be an expensive way to finance an education. Take your friend to your campus financial aid office to talk to someone about federal student loans. These loans are generally a much cheaper and safer alternative when paying for the costs of going to college (like tuition, books, housing, and living expenses). The most common federal student loans don’t require a co-signer.

It’s possible your friend has a legitimate need to find a co-signer, but before you sign your own name, consider the risks. Don’t let your good intentions run the risk of harming your financial health.