#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
Tag Archives: LIz Weston
MILLENNIALS NEED TO BE CONCERNED ABOUT MEDICARE
#millennials #Medicare #RetirementSavings #HealthCareSpending
Millennials may be a long way from Medicare eligibility.
But they need to care about it now, lest it runs out of money, or pays fewer benefits, when their time comes.
“Previous years’ surpluses, stowed away in a trust fund, will cover the (funding) gap until 2029. After that, Medicare Part A will be able to cover 88 percent of promised benefits, rather than 100 percent,” writes Liz Weston, a personal finance columnist for NerdWallet.com. Her column was published March 3, 2018, in The Atlanta Journal-Constitution.
Weston also writes that the younger folks need to figure out ways to cut health care spending in general.
Let’s break down the situation. First, as Weston writes, some in Washington are itching to cut Medicare, which provides relatively affordable health insurance to the 65-and-older demographic. Depending on what happens in Washington, health care costs could go up for millennials as they age. “Without a sturdy Medicare system, health care for older Americans could quickly become unaffordable,” Weston writes.
Also, young people in the private insurance market – those who do not have decent insurance benefits from their employers – should think about buying individual insurance policies now. Sure, you think you are young and won’t get sick or injured, but what if you do? Plus, they are relatively affordable for young, healthy folks. Also, having a health insurance policy young may make it easier for you to get health insurance when you are older.
Young folks tend to spend less time thinking about eventualities when they get older, so they tend to spend more and save less. The earlier in life you start saving, the more comfortable you’ll be when you get older. Also, retirement won’t necessarily come when you want it to. Companies reorganize frequently, and jobs you think are indispensable today could be gone tomorrow.
“Millennials already have enough burdens. They earn less, have a lot less wealth and owe a lot more in student loan debt than previous generations did at their age,” Weston writes.
So what’s a young person to do? First, have a bona fide, regular savings plan. Even if you can only put, say, $5 a week into it at the beginning, do that religiously. As your income increases, add more. Any raises you get should go into that fund, so, as your income increases, you can learn to economize on living expenses. Whatever you do, don’t touch that money until many years down the road.
Easier said than done? Perhaps. So you have to make a point of doing it, perhaps sacrificing some immediate pleasures to ensure you are keeping your promise to yourself.
As your savings increase – when your fund builds to a point that keeping it in a bank account seems unprofitable – find a trusted investment adviser who can guide you through the different investment vehicles for each stage of your life. Unless you are a financial professional, trying to manage your own investments can be risky. Obviously, some risk is warranted, but good, objective advice on the type of risk for your situation is essential.
Then, think about how you use your time. Are the things you spend your non-work time on enriching you? If not, there are many vehicles out there that, with a small investment of time consistently, can make you money. To check out one of the best, message me.
Young folks need to worry about Medicare, if they want it available to them when they reach that stage of life. So, pay attention to what happens in Washington. But, also, set up your own life so that no matter what happens, you’ll have the best life you can get when you reach your parents’ or grandparents’ ages.
Peter