For pity's sake, Christine, say no! Don't throw your life away for my sake!
Raoul De Chagny
Phantom of the Opera
If you are a parent of a college student and are thinking about co-signing your child's student loan, you should read an article posted recently on Moneytips.com and re-posted on Personal Finance Syndication Network.
Moneytips reported on a survey by LendEdu that asked parents to rate their experiences as co-signers of their children's student loans. The survey findings are harrowing:
- 34 percent reported that their child failed to make a payment on time.
- 34 percent reported that a co-signed loan hurt their ability to apply for financing.
- 35 percent of survey takers regretted co-signing a loan for their child.
- 57 percent said that a co-signed loan had hurt their own credit rating.
Parents often fail to understand the catastrophic consequences that can result from co-signing student loans with their children:
First of all, co-signing parents are 100 percent liable for paying back the loan if their child fails to make loan payments.
Second, a parent will find it very difficult to discharge a co-signed student loan in bankruptcy. Like student borrowers, parent co-signers cannot discharge student-loan debt in a bankruptcy court unless they can demonstrate "undue hardship"--a very difficult standard to meet.
Third, if a co-signed loan goes into default, penalties will be assessed to the amount borrowed, and the parent's credit will be adversely affected.
There are exceptions for almost every rule, but there are no exceptions to this one: NEVER CO-SIGN A STUDENT LOAN FOR A CHILD. If your darling child's college plans require you to co-sign a student loan, then your child needs to make another plan--a plan that doesn't put your financial future at risk.
Why Co-Signing a Loan Could Delay Your Retirement, Moneytips.com April 28, 2017. Re-posted on Personal Finance Syndication Network, pfsyn.com