It’s bad enough that student loans are trapping young students in a sea of debt. Encouraging them to take on huge debt loads and keep that debt for 20 or 30 years or more. Yuck!
Even worse than that is the fact that a growing number of parents, even grandparents, are being asked to co-sign these nasty student loans or take out Parent PLUS loans for their children.
In Part 1 of this series, I encouraged you to handle the question of co-signing a loan for someone like this: Never, ever co-sign a loan, of any kind, for anyone.
Especially not a student loan… they are one of the worst types of loans to co-sign (or enter into in general).
In this post, I will share some more real life examples to show you why you should never co-sign a student loan.
The quotes come from several articles. I will provide you a link to those articles at the end of this post.
One parent who had co-signed a student loan said this:
“I co-signed some private student loans for my youngest child. She graduated two years ago with about $80,000 in student debt, including federal and private loans. Like many other recent graduates, she has had a difficult time finding a job. She worked part time at a retail store until about a month ago and made around $7,000 annually. I have been helping her make reduced payments and she has gotten deferments and income-based repayment plans.
But I’m planning to retire in a few months and won’t be able to make the payments as I have been. I am heartsick about this whole situation, not just for my family, but also for thousands of young people who face this mountain of un-dischargeable debt. We desperately need some advice on how to deal with huge debt.”
Can you imagine the pain and regret this parent is feeling? “Heartsick” and feeling desperate. And planning to retire in just a few months.
This student debt is either going to force them to delay retirement indefinitely (maybe permanently) or the government and/or private lenders will create a nightmare in their life as they step up their enforcement actions against the parent.
They can confiscate their tax refunds. They can take some of their social security checks. They have powers to collect and make your life miserable if you don’t make the payments.
The only sane answer is to avoid co-signing in the first place.
Here’s another parent who is experiencing the effects of co-signing.
“My daughter, Gina, was the first one in our family to go to college. Of course, we all were proud. She chose a school that was rather pricey, but she had some scholarships and loans. She graduated last year.
In college, Gina needed me to be a cosigner on her loan. Now I am discovering the cost of doing so.
Gina did not get a job right after graduation, and her bills have come due in a big way. The loan companies are demanding their money and are going to start tapping Gina’s wages. She makes just enough to get by as it is.
I understand the loan companies are due their money, but they are not willing to work with Gina so she can pay an affordable amount each month. I assume they will get around to going after my wages, as well, and I can’t afford that, either, since I am a sole homeowner with my own bills.
Now I know why college is so unaffordable for most people. I worry for my daughter and am not sure what to do.”
Not only is this parent feeling the weight of her daughter’s struggles, she is also worried the government or private lenders will go after her own pay check. She is worried about how she will pay her own bills every month if they start taking her wages.
And she is right to worry because student lenders have incredible powers when it comes to garnishing wages and creating havoc in your life.
You Have Other Options
Finding the money to pay for college is a huge task.
Many people tend to think student loans first because they are marketed as fast and easy. But there are many other options that should be considered. Scholarships, work programs, working along the way, and picking a school a person can afford (just to name a few).
I am not a fan of student debt because it can be one of the nastiest forms of debt when life throws a curve ball along the path to a good paying career for your child.
Too many people ruin themselves financially by taking on student debt. And worst of all, parents who co-sign student loans can be ruined financially as they attempt to plan a retirement with dignity and peace of mind.
Reaching your retirement years with the stress and strain and worry of student debt would be horrible. What a terrible way to live those years as a parent.
Saying NO to co-signing student loans will help you avoid a really bad financial mistake.
(Here are the links to the two articles I quoted from.)