<p>Be VERY careful about guaranteeing a student's debt. Sadly, many student loans , especially the private loans, are requiring a parent , who has good credit, to guarantee the loan of the student in the event of a default by the student. Many parents think this isn't a problem since the loan will be paid by the student once they get out of school....DON'T DO THIS!</p>
<p>Statistics are showing that a whopping 50-53% (depending on the article) of kids recently graduating from college are either unemployed or underemployed. With college loans escalating over what they have been years ago, many more parents are being required to honor these guaranties. I would suggest that you think about this VERY CAREFULLY before you undertake such as guaranty.</p>
<p>My oldest had both Stafford & Perkins loans, youngest has Stafford.
We took out smallish Plus loans for each, not for the entire amount. Oldest loans are paid off and her current job pays about the same as her dads ( not counting his overtime)
Students do not need a cosigner for Direct Stafford or Perkins loans.
Govt loans can be deferred when doing community related service like Peace Corps or Americorps. Depending on career choice, some Stafford/Perkins loans can even be forgiven by programs that encourage students to go into public service- underserved areas.</p>
<p>Horror stories about rising debt have been in the news for at least ten years.
Are people really not aware that debt needs to be repaid?</p>
<p>Any student who is eligible to file the FAFSA (US citizen, US legal permanent resident, certain other immigration statuses such as refugee/asylee) can borrow federal/Stafford loans on their own. If the student is awarded a Perkins loan by the school, or a loan offered by the school itself, that doesn’t require a co-signer either. The federal/Stafford limits for a dependent student are: $5,500 freshman year, $6,500 sophomore year, $7,500 junior year, and $7,500 senior year.</p>
<p>Too many families don’t think about paying for college until the kid has his/her admission in hand, and this leads to all kinds of problems. It is unfortunate that there is no easy way to get the word out. Some of the students who end up in the most debt come from families that are the least able to pay it down.</p>
<p>I agree – when the question has come up, I’ve always advised parents to NEVER co-sign or guarantee loans for their kids. A borrower who needs a guarantor shouldn’t be borrowing in the first place. Parents who want to help their kids and have good credit should take PLUS loans in their own names – if they want to work out something on the side with their kids to pay them back later, fine – but at least then they understand that they are talking on the responsibility. </p>
<p>The problem with co-signing the loan is that the end result is often more costly than the loan amount: it can tear apart families. The kid who is not able to keep up his payments typically ends up not talking to the parents, because he doesn’t want to confront or deal with the debt issue. The greater the hardship on the parents, the more shame and guilt borne by the kid, and the greater the level of avoidance. So co-signing a loan that the kid may default is one way to guarantee that the parents will have an estranged child who breaks off contact.</p>
<p>It does seem illogical to have two people on the hook for one loan – especially a long-term loan. If the child cannot qualify and the parent can, why not just have the parent directly take out the loan? The parent is most likely to die first and if the estate is insufficient, the loan gets dismissed rather than bounced back to the child. </p>
<p>On the other hand, I have heard of cases where the child dies in an accident or by suicide and the parent has to deal with not only personal grief but also a monthly financial reminder, perhaps for decades. If you co-sign for your kids, at least get term insurance on them for the duration of the loan to protect yourself.</p>