I am worried about cosigning student loans for my daughter. Does anyone have experience with this or should I be worried ?
Parents plead forgiveness for late daughter’s $200K student-loan debt http://www.today.com/health/after-daughters-death-parents-plead-forgiveness-her-200k-student-loan-1D79996678 via @todayshow
If that is a concern, you could take out a life insurance policy to cover the loan.
“should I be worried”
Yes. By consigning you’re saying if D can’t pay, you will pay and lenders will remember. Do you see yourself in future being in position to pay x amount of dollars of student loan debt in your 40s, 50s…? Will you have other kids with a pen in hand? It’s been said that a co signer is an idiot with a pen in their hand. Hopefully you’re being proactive and this decision is to be made in the future so as you can have a frank talk with D about college costs, what you can afford, and viable alternatives such as community college. Good luck
It is often the better course to follow the path @Jugulator20 has described. Co-signing is a chancy proposition, because the future is uncertain. I co-signed on my daughter’s rental leases because it was a modest sum that would not pain me if I had to pay it. Once it gets beyond that level, it is usually undesirable.
This story was hashed out over and over.
They knew she had liver cancer. She continued in school. She had to have a liver transplant and was on the waiting list.
Seems to me that they were very ingenuous to think “heck, she’s dying, so they won’t hit us up for all that education she got while she was alive”. They should have gotten money back for all those meals she ate too?
And if you read various articles, her parents are concerned that they “can’t take as many vacations due to the debt”. Well, boo hoo.
We are not co-signing loans for my son - we are taking out from our HELOC because the rate is much lower. I would say the first thing to look at is whether you can take out lower rate loans on your own, and if you don’t trust your child to pay you back (eventually or per a set schedule), you draw up a contract loaning them the money that you got.
At some point, anything that you co-sign will come back to you. Yes, they should require life insurance on both parties when one is cosigning for the other - what happens if a parent dies, and the child can’t pay back the loan?
There are 2 outcomes when you co-sign a student-loan for your daughter. 1.your daughter will be required to pay back that loan so that she will be saddled with any debt you sign for. Depending on the total debt, that student loan may govern how she is able to live her life after college- if she can afford to buy a house, if she has to take on a second job, etc 2.in the event your daughter either can’t or won’t pay back the loan, you will be responsible for paying it back. It is best to look at the situation as if you will be paying back the loan because that is the only way you can plan for the impact of the loan on your life. Figure out what the monthly payment will be and ask yourself if that is something you are willing or even able to pay as you are trying to save for your own retirement. Consider situations where even though your daughter may be well intentioned, she is unable to make payments: she can’t find a job, she is working at a very low-paying entry-level job etc. What if she decides to continue on for a Master’s or more? Will she have to take on even more loans?
It is a personal choice but one you should look at carefully. Our choice was that we refused to co-sign for any student loans for any of our 4 kids because we felt it would be doing them a disservice. Two of our kids have been able to buy homes since graduation. Our son recently thanked us for refusing to co-sign for loans. He said most of his friends have large student loans and it is really affecting how they are able to live. Just be sure to be well informed.
Do you have more than one D in college? In 2013 you were sending a D to college. Is this the same D? how much have you cosigned for so far??
Why are you all borrowing so much?
How much will the total be for loans?
What is your D’s career goal and how much will she be earning upon graduation?
If parent loans or parent-cosigned student loans are needed, then that should be a signal that the amount of debt needed to pay for college is large enough to be high risk for the student and parents’ financial situation.
There may be some cases where the parents have a large asset that they intend to sell in the future, but prefer not to sell now, that could easily pay for the amount of the loans in question. But these are uncommon outlier cases.
^^^Pretty common in California 
^^^not among the people we know. We must run with the wrong crowd lol…
Well, I see some sort of mysterious facets of the article that I think considering could help other families avoid crippling debt.
First of all, it’s unclear why the Masons thought that a single mother with three young children should borrow $100K to be an RN with an associate’s degree. Nurses do make decent money, but early in their careers they don’t make enough money to comfortably repay $100K in debt, and associate’s degree nurses don’t have the promotion potential that BSN nurses do these days to even get their incomes to the level at which repaying these loans would be comfortable. Anyway, the learning experience here is to carefully consider the kind of career that your child is planning to take, as well as how likely they are to actually stay in that career, to need graduate school, etc. Borrowing very large amounts of money for a student who wants to be an artist or social worker might not be a good idea. Borrowing large amounts for a student who majors in computer science or engineering may not be a good idea, either, if they tend to change their minds a lot or are kind of unsure about what they want to do (and even if they’re not - my husband was really sure he wanted to be an aerospace engineer, until he wasn’t anymore). And borrowing large amounts for students who know that they need expensive professional or graduate school - like medical, law, or business school (which requires a lot of extra debt) or PhD studies (which requires a lot of time, over which debt will accumulate interest costs) might also not be a good investment.
Read the details of the loans VERY carefully. The Masons seemed surprised by the fact that they’d be stuck with their daughter’s loans if she died and that these loans were not dischargeable in bankruptcy, but both of those pieces of information are detailed in the terms and conditions of EVERY loan. Furthermore, there have been stories like this before - there are lots of sad stories out there of students who had big dreams, borrowed huge amounts of money, couldn’t find a job and saddled their parents with their huge debt.
I think lots of parents who cosign just assume that their child is going to be successful and never consider the possibility that they might have to repay the loan - it’s like Monopoly money at that point. But any parent considering co-signing a loan for a child should visualize themselves repaying the loan.
Probably, also, being realistic about what you can afford and such and prudent with that money. I have no idea how they managed to rack up $100K of student loan debt by sending their daughter to a two-year college to get an RN. Maybe she was borrowing large amounts of living expenses to take care of her children while she was attending full-time, or maybe she went to an expensive college before the CC and dropped out - who knows. The details are unclear. But I guess setting limits and thinking realistically about how much you can borrow is a good idea? It seems like every year there’s a story about a kid who dreamed about going to some fantastically expensive college (often NYU), who didn’t get enough financial aid, and whose parents borrowed FAR more than they could afford to send them there. At the time, the emotionality and dreamy nature of it can overtake reason, but parents have to be the ones to put their feet down and teach their kids about fiscal responsibility and spending within their means. Most people can’t afford a Bentley, but a Toyota will get you from point A to point B just as well - perhaps in less style and with less ooh factor, but it gets the job done.
@mamom - thanks for the response and the feedback. I thought getting additional life insurance was a good idea. I really wonder if colleges couldn’t provide life-insurance to students to cover these types of events. Has anyone ever heard of schools helping families in the case of the death of a parent or student?
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anyone ever heard of schools helping families in the case of the death of a parent or student?
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With what? Help them with their cosigned loans? I don’t know why they would. If they were going to do that, then they’d likely offer some sort of credit insurance…paid by premium.
There are nearly always less expensive choices for education. The luxury choice of going to a more expensive school, and borrowing to do so, should be the burden of those deciding to borrow/co-sign.
I think Plus loans are cancelled if the student or parent dies, but I’m not sure.
How much is your child borrowing and why is the amount so much that you need to cosign?
Life insurance for the student, to clarify, to cover the amount of the loan.
Oh my, if you are worried about signing student loans, you should be…are you talking short a smaller amount, or big? What are student’s choices for lower cost school, or student working/saving more? Can parents work an extra job? Debt is dangerous.
Credit life insurance is a different product than term life insurance or whole life. Different types of companies offer these products, they are priced very differently, regulated differently, sold differently. Cost of credit life is based on the amount of credit, not the age/health/education/state of residence of the borrower. One doesn’t have to qualify for it, except to be between 18-65. The beneficiary is the lender. As the loan is paid down, the amount of the insurance value decreases. For term or whole life, the beneficiary is designated by the buyer of the policy, the amount of the insurance does not decrease during the term (may increase if whole life), the buyer must qualify for it (so in the case of the $200k nurse with cancer, it is unlikely she would have), and you have to pay the premiums every month. It has nothing to do with the loan, it is an entirely separate financial transaction. Credit insurance is only available on the borrower or co-borrower, not to a co-signer.
Credit insurance is only offered by the lender, so in the case of student loans by the government or the private lender. In the case of government loans, there is no benefit to offering it since government loans are forgiven upon death of the borrower. For a private lender, credit insurance MAY have been offered and the borrower turned it down -we don’t know. It would really depend on whether the lender normally offers credit insurance on its loan products. It’s fairly expensive to the borrower and requires separate disclosures by the lender, so not all lenders offer credit insurance.
Banks do not/cannot offer non-credit insurance products. I’m not even sure they can refer customers to insurance agents (pesky federal regulations and all).
Assuming you both qualify, a simple term life policy from a reputable carrier would cover the death risk.
Don’t know where you live or what or where your kid plans to study - so, in the abstract, if this is the only way you can afford it - you can’t afford it. Co-signing almost always comes with a headache, Cosigning an unsecured $50k+ education loan is not a sound approach. Especially if your retirement isn’t secure yet - i am guessing yours isn’t.
I’d find another way to pay or find a more affordable school.
I guess that is the odd thing about the nursing student case. It seems to me that the parents never thought they could pay it, so they were essentially defrauding the loan company when acting as co-signers.
If someone does co-sign for a loan, I would think it would have to be definite that they could cover the loan payments.
How can anyone think co-signing a loan is any “better” or less onerous than signing your own loan?
However, this seems to indicate that the co-signer can be removed once the loan “owner” makes enough on-time payments:
http://www.bankrate.com/finance/debt/loan-co-signer-what-are-my-rights.aspx
(of course, that is a ridiculous case - loaning your son’s girlfriend money?)
That nursing story always bothered me. This young lady was in her 20s when she died. She had 3 kids that the parents are now raising/supporting. WHERE is the dad(s)??? It would seem that child support for those 3 kids might be enough to make paying those monthly loan payments more affordable.
Just two years later, the single mother died suddenly, due to liver failure, at age 27, leaving behind three children between the ages of 4 and 9.
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Why did these parents ever think that a single mom of 3 (with no child support) would be able to afford to pay back $100k in loans to begin with…even if she were healthy??
Well it’s really very simple. If you’re uncomfortable with the idea that you may have to repay the loans, don’t cosign them. I never really understood the point of cosigning educational loans for the kids. Why not just take them out yourself under better terms (i.e. home equity)? If the parents can’t afford the loans, what makes them think their children, with an uncertain future and no credit, can afford them?