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If the parents can’t afford the loans, what makes them think their children, with an uncertain future and no credit, can afford them?
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@NJSue
This is such an excellent point.
The pastor and his wife have an income of about $100k (actually, I think in an earlier article, the income was revealed to be about $115k…$75k for pastor, $40k for wife).
When their DD died, they immediately knew/believed that they could not afford to pay back those loans, particularly because they were now raising the three kids.
Hmmmm…well, certainly their newly-graduated AA RN daughter who was taking care of three kids was making a lot less than $100k…so why did they think SHE could afford those loans??? I don’t know how much she was earning, but I’d guess somewhere around $50k (others can correct me).
Honestly…I just think that family was just a bunch of naive shallow-thinkers. I feel badly that they’ve had this tragedy, but likely, even if she had lived, the parents would have found themselves stuck with those loans. I don’t know many/any single-mom AA RNs with 3 small kids who could even afford to make payments on $50k of student loans.
It appears that the DD worked for about 18 months before she got too sick to work. I wonder if she made any payments while she was working.
Thanks for sharing the BankRate article - very helpful to know I can be removed as a co-signor.
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Don’t count on that. there is another parent here on CC whose cosigned loans offered that. Then the loans were sold during that initial repay period and that option was no longer an option.
@1966Parent ,
In the event you do co-sign the loan and want to purchase life insurance, you should go to this website
http://www.term4sale.com/
price out and purchase set-year level-term insurance on your child for the principal amount of the loan. For young adults, the coverage is quite inexpensive. It’s an unpleasant prospect buying life insurance on one’s child but, if the debt survives, then it is necessary.
Yes, the bankrate article notes that you have to be careful about the loan being transferred.
If getting term insurance, get insurance that you own - can take out 10, 20, 30 year fixed rate. If healthy, can get good rates. If young and healthy, excellent rates. Dave Ramsey recommends Zander Ins 800 356 4282. I went with A or A+ rated insurance companies after getting three price quotes from them and choosing a company. If no health issues, pretty reasonable on yearly cost. Will have blood drawn and health questions. Zander will help and follow through with you.
It was nice to have in place for our young adult children. I know when H and I were in our 20’s, we had no clue about life ins. Our kids have no school debt, but it is even more important if they do.
Sometimes people take out mortgage insurance or other life insurance when they cannot qualify for cheaper ins like term life insurance. The gal going through nursing school with $100K in loans and liver disease for Assoc Degree was crazy debt, and then parents co-signing and now have the 3 kids and the debt due to her death.
And we did get asked about debt etc in the term insurance application process. Since both our kids’ policies were for what I am insured for, I guess that answered their question. My response was also ‘we all plan to live long lives. I just believe in insurance.’
Some people have a more difficult time paying off school and other debt than others do. Just because you can take out a certain level of debt doesn’t mean it is a good idea. Some families get enamored with the hope/dream and forget financial principles and the risk being taken with the debt.
We as US consumers are so brainwashed into getting a new car with a car loan, etc. Students finishing school think getting a car loan is OK.
Absolutely don’t take out the debt unless small enough amount and only way, with a short time frame to pay the debt off. Most people have not planned/saved for retirement, and co-signing on student loan is just another financial burden.
There was just an article online this week that said that 90% of private student loans require co-signers, and that only 10% of those co-signers are released before the loan is paid off. There is no obligation for the private lender to release the co-signers. Many lenders can set conditions for the co-signers to be release, such as 2+ years of perfect payment history by the borrower (not by the co-signer) and the lender will check to see who made those payments before granting the release. Be late on one payment and the two year period starts again. The co-signer release will be a policy of the lender, and policies can change all the time. There is no law that requires co-signers to be released.
Term insurance can be inexpensive on a young adult, but those taking out private loans tend not to have a penny to spare or they wouldn’t be taking out the loans, and in the case of the nursing student above, it’s unlikely she would have qualified for a term policy except through an employer. I also believe that the proceeds of the policy would be used for other things (funeral) and the co-signed loan would still be there, the responsibility of the co-signer.
This seems like a more important topic then I realized. I am not endorsing any particular policy - but it seems like a no brainer that if you co-sign a loan to also purchase term life insurance on the child you are supporting. It is horrible to imagine - but to be left without a child and have to pay their student loan seems like a crime.
please use old threads for informational purposes only.