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Should Parents Co-sign Student Loans?

co-sign, student loan, loans, chapter 7, attorney, attorneys, lawyer, lawyers, California, CA, bankrupt, Bankruptcy, Stockton, citrus heights, roseville, sacramentoMost parents do not hesitate when it comes to co-signing for their children’s student loans. Many parents are distraught over the fact that they are not able to afford to pay for their kid’s education themselves, and this is one way of being able to soften the blow.

Unfortunately co-signing for these loans can lead to some drastic situations. It’s imperative to remember that as a co-signer, you are just as liable for the debt as the actual borrower! If payments are made on time: no problem. If your kids start missing payments, however, expect to hear from the lender. Furthermore, if the account is past due, your credit score will get hammered.

There have been some situations where students have taken on a large student loan debt and then have met with catastrophe, such as death or critical injury. In these situations, the student can no longer meet their obligations. Many students in today’s economy also have trouble finding jobs, making the repayment of burdensome student loans extremely difficult. In these cases, the responsibility of payments falls squarely on the shoulders of the parents.

The best way to go about this situation is to really understand what the terms and conditions are that you are co-signing for. You should ensure that the responsibilities of a co-signer are complete and clearly outlined. Oftentimes, the lenders that offer the ability to co-sign are private lenders, and therefore don’t enjoy the luxuries of deferment, forbearance, or income-based repayment.

Aside from reading the fine print and ensuring you understand the loan agreement, a few other helpful tips regarding co-signing are:

1. If the primary borrower (e.g., your kid) misses a payment date, contact them immediately.

2. Ask the lender to send you a copy of the monthly statement either by mail or electronically.

3. If the loans are federal and payments are missed, ask about deferred or alternative payment plans.

4. As a last result, plan to take over the payments until the primary borrower can resume payments themselves.

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