#SchoolLoans #CosigningSchoolLoans #EndangeringRetirement #StudentLoans
Students looking to go to college might hit up one or more grandparents to co-sign for a student loan.
Personal Finance columnist Liz Weston recommends against it, for the most part. She discussed the topic in an April 29, 2018, edition of The Atlanta Journal-Constitution.
Here are Weston’s reasons: late payments will trash the grandparents’ credit; if grandparents have to take over payments (perhaps because the student, presuming he or she graduates, may not find a job immediately, or has to take a low-paying job), the strain on their finances can endanger their retirement.
Of course, this could be a moot point if the grandparents are independently wealthy.
So, if you are considering co-signing a student loan for your grandchild, or the child of a friend or relative, consider this scenario: the child graduates from school with a five- or six-figure debt, and can’t find lucrative work – or, at least, work that would match what he or she studied. If you’ve co-signed a loan, the debt collector will notice that and come after you almost immediately, because there may be a house or other assets they can tap quickly.
If you are a student, do you want to put your grandparents, or other friends or relatives, in that position?
If you are the grandparents, or other co-signers, do you want to mortgage your future for the sake of that student? At least in theory, the younger generation should be working to help the older generation, not the other way around.
If you are distant from the student, and co-sign a loan because your friend or family urged you to, how much do you think the student would care that he or she has saddled you with this debt? Many students believe college loan debt is something they can blow off temporarily until they get financially settled. If the debt collector has already been repaid by a co-signer, the student may not be obligated to repay you. What lesson(s) does that teach?
It all goes back to the reason a student chooses college in the first place. Certainly, students with good grades and a clean record should actively consider a college education. Perhaps that student can opt to start his or her education in a low-cost community college, and graduate up to a four-year school.
That would ease the college tab a good bit. But as the student and parents think about the student’s future, they have to consider what the student will do with the education, and whether what they do would be worth the investment (or expense, depending on how you look at it).
Another idea: defer admission for a year, and have the student get a job that will allow him or her to save a good chunk of money for college.
Also, does the student have the discipline, ambition and tenacity to do well in college, in spite of temptations that could distract him or her? A smart student with no drive is like a shiny car with no engine.
And, if the student has the drive and smarts for college, but chooses a field of study that will be enjoyable, but not terribly lucrative, perhaps the family should consider a vehicle that will help the student pursue his or her passion, while earning a potentially good income with a few part-time hours a week.
There are many such vehicles out there. To check out one of the best, message me.
Weston, in her column, goes on to advise grandparents, and other co-signers, how to deal with the problem if they’ve already cosigned.
Here’s her warning, if you are in too deep: “Talk to a bankruptcy attorney. Student loans are extremely difficult to erase in bankruptcy court. …. If you don’t have any assets other than retirement funds, and your only income is from Social Security and pensions, you may be “judgment-proof. That means, if you are sued, the creditor can’t collect anything.”
Try not to get yourself in that situation. If you are asked to co-sign, say no, firmly. Your grandchildren, relatives and friends may be disappointed. If they are, so be it. You will have done the right thing by you.
Peter