Co-signing a student loan for your child sounds innocent and noble in the beginning. But co-signing oftentimes goes terribly wrong and can ruin you financially as well as tear relationships apart.
A Huffington Post reader wrote this note to Steve Rhode (the Get Out of Debt Guy) to ask his advice:
“Dear Steve,
Our daughter went to an expensive private college, she was unable to secure loans on her own and my husband co-signed for her federal student loan, she has since graduated but has only recently been able to secure a full time position.
She is very delinquent on all of her student loans. My husband’s company has downsized due to the weak economy and he has been reduced to part time. He is 65 years old and will be started his Social Security benefits soon.
Can the collection agency handling this student loan go after his Social Security benefits since he is the co-signer on this federal student loan?”
Here is the first part of Steve’s response:
“Here is the bit about cosigning everyone needs to understand. As a cosigner you have 100% of the risk and liability and 0% of the benefit. The reason the lender asks for a cosigner is so they can go after someone with better credit when the other person defaults.
If someone asks you to cosign, always say no.”
I agree. Just say no. Here is the rest of Steve’s answer.
I talk more about the facts of co-signing a student loan here.
You will be surprised what could happen.
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