The cosigner would not be able to deduct the interest unless the student was the cosigner's spouse or the cosigner's dependent at the time the loan was taken out. For a cosigner added after the original loan was made, it's not clear whether the requirement that the student was the cosigner's dependent "when you took out the loan" means when the original loan was made or when the cosigning occurred. The IRS rules don't discuss the possibility of a cosigner being added to an existing loan. The cosigner trying to deduct the interest, presumably without a 1098-E, is just asking for trouble.
The whole cosigning scheme is just not going to work.
