<p>We are blessed to have a solid income, but with that comes $0 financial aid. I have heard people say that parents should NEVER sign a student loan with their kids. What have you experienced? Any words of wisdom?</p>
<p>I would go a step further and say that a parent should NEVER allow their children get private student loans (regardless who the cosigner is).</p>
<p>It is recommended that the maximum a student should be borrowing is Direct (Stafford) loan limits from the federal government, that comes out about 30K for all 4 years. I had a car loan for 30K once (yes it was a nice car and I was young) and I did not like paying for 5 years, even thought my income was well above median. I cannot imagine what it is like to have bigger loan like that that is not mortgage.</p>
<p>To me this is an odd question. Are you saying that you expect your kiddo to pay for college? If so, i would say send them to CC for two years and finish up at a financially viable uni for the remaining two years. Just be up front with the kiddo and be honest if you cannot afford to help with college…I think it would be wrong to saddle him/her for the loans that would be needed above and beyond federal direct (which should cover CC for two years).</p>
<p>I am completely against the whole idea of cosigning loans and would never do so. A cosigned loan appears on both the borrower and the cosigner’s credit reports. The cosigner has all the responsibility for the loan, but little control over it. If the borrower misses a payment, the cosigner’s credit rating may be negatively affected before they even know anything has happened. And if anything happens, the cosigner is ultimately responsible for the loan. For instance, if the student were to be unable to work or, God forbid, pass away - the cosigner will still have to pay off the loan. </p>
<p>All students that are eligible to file FAFSA are eligible for federal student direct loans. Those can total around $30k for the entire college career (for independent students). Any more debt than that is too much in most cases. Parents are eligible for federal parent PLUS loans. Both types of Federal loans can be cancelled in the event of the student’s death (unlike private loans).</p>
<p>If you decide to cosign, take out a term life insurance policy on the student that will protect you until you can be removed from the loan after two years of payments have been made on the loan.</p>
<p>The other danger is to the student. My husband and I may soon be forced to file for bancruptcy and are hustling to get his name off our daughter’s loan before that happens. Otherwise our credit disaster (due to job loss and medical expenses) can hurt her.</p>
<p>co-signing loans for your kids is a bad idea because you are sticking your kids with a LOT of debt. Why are you doing that??? …especially if you’re “blessed with a good income”? Why aren’t YOU taking on the debt (or paying)…or looking for other alternatives…like merit scholarships or less expensive schools?</p>
<p>Regular Stafford student loans is more than enough debt for nearly all newish graduates to handle. To help a child take on more debt is really risky and (IMO), not what a wise parent would do.</p>
<p>Afterall, do you want your adult children living with you because that debt you co-signed makes it too difficult for them to live on their own? If you wouldn’t mind that, keep in mind that your kids will be limited to only seeking employment in your area…which may not be hiring in their fields.</p>
<p>“Never” is a tough word that leaves no out. So as the 007 flick says, “Never say Never”. Cosigned loans are not a good idea in most cases because both of you are responsible for the loan regardless of what happens to either of you, and it is on both of your credit reports. Parents and relatives may do this sort of thing all of the time for a car loan, but with those we are usually thinking a lot less money and over a much less period of time, and you have a car in there that can be sold to take some of the burden off if things get bad. A school loan can be like a mortgage and follow you for the rest of your life and the amounts are such that they can seriously affect credit and possibilities. You want to sign on the dotted line for that retirement home or assisted living? A big, fat school loan for your kid can quash that deal or make you pay more for it. What hurts more is that AT THE SAME TIME that same loan can be problematic for your kid in jobs looking at credit reports or if he wants to buy something. So it’s a double whammy, and many times if either of you die, the other is still on the hook. With PLUS, when parent or student dies, the loan obligation is “poof”, gone.</p>
<p>Continuing with my pontification, I want to add that it is possible that a private loan may be the best alternative. I was in the camp of the “nevers” but since then have been advised, and have to agree that there are times that your child could get an opportunity without the funds, while you, the parent cannot qualify for PLUS, and it is such a good deal that everyone wants this to happen. Also, maybe the outside loan is sooo much better in interest rate than the PLUS and you know you and the student are disciplined enough to pay it off, so you want to get that better deal. </p>
<p>So if your student is accepted to a program like nursing that is impossible to do at a local school, and this is really what s/he wants and looks like a good risk in completing the program, and you have no other way to pay for it…well, maybe give it a go. I would shut down the support the instant the terms change, however. This is not a situation where paying for that Psychology or other general degree is going to be the same thing. You are paying for something hard to get and a chance for your kid to get that. There are other alternatives in most courses of study, but if your child has his/her heart set on a rare program that has good financial possibilities after completing it, it might be the best way to go. </p>
<p>I know someone who did get a private loan at a rate that is close to PLUS, with both kid, both parents and yet another relative signing on it and the house thrown in as collateral to boot. You have to tread very carefully with these loans because they often are NOT good deals. Better to go the route of PLUS even if the interest rate is more due to the flexibility in terms.</p>
<p>It is nobody’s business if a parent chooses to co-sign their child’s student loan. I would just suggest that the parent, in that case, be fully prepared to pay back that loan in full if their student cannot or will not. My personal feelings about bank loans are another matter.</p>
<p>While it may be “nobody’s business” if a parent cosigns a loan, the OP asked for opinions. </p>
<p>It’s one thing for a PARENT to take out loans that the PARENT would be responsible for, but it’s another when the parent is literally setting their child up for a lot of pain and struggle later by not being the adult and saying “no,” and helping the child find more affordable alternatives. RARELY would there be a situation where the only choice is private loans. </p>
<p>More typically, the need to co-sign loans involves unaffordable EFCs, the parent thinking the child “deserves XXX school,” the child insisting on a pricey school and refusing to consider alternatives (starting at a CC, applying to schools that will give large merit, commuting to a state school, working full-time over the summer to eliminate much/most need for more loans, etc). The parent has to be the adult in these situations.</p>
<p>Look at the kids burdened with huge loans while attending NYU. How is going to NYU some requirement?</p>
<p>We are blessed also with a solid income which means 0 financial aid for us also. We have decided against co-signing any loans for our daughter. She will be responsible for paying back her Stafford loans. We took out a Parent Plus loan for this year (she just finished her Freshman year) we were naive about the whole college thing and thought there would be more merit scholarships available for her. She is working two jobs this summer and saving as much as she can to help with her sophomore year. We have enough saved for her fall semester tuition and are working on saving for her winter quarter. It is tough, but I would advise against co-signing if it were me.</p>
<p>If you cannot pay for the college through savings, current income, and a modest amount of student loans (the Stafford limits or less), then you should be looking for a less expensive alternative. mom2collegekids’s list is a good one: “starting at a CC, applying to schools that will give large merit, commuting to a state school, working full-time over the summer to eliminate much/most need for more loans.” There is no educational or career advantage from the pricey schools, in spite of the massive hype machine that preaches otherwise.</p>
<p>While it does put you on the hook, check out the promises on the website and in the documents. Our loans allow the co-signers to be released after 36 continuous payments. I think I saw another one that had an even shorter time period.<br>
Parent cosigning can substantially reduce the rate on the loan to a point where it is a good financial choice. And now lenders are offering fixed as well as variable rates (here’s hoping that I’m right that variable rates won’t be rising soon).<br>
If you and your kid have made the choice that that school is the right investment for him/her, and you can’t get a grant/scholarship to cover the full tab, someone has to pay the rest of it. In our case I think that our son’s choice of schools, choice of major, his and our networking, and his intelligence made cosigning the right choice.</p>
<p>That’s why I would not say “never” blanketly. It is an area fraught with dangers, and anyone who is thinking about doing this should take a long hard look, search for alternatives, and understand the terms very clearly. What is bad, is when people sign for loans, any loans, take any commitments without thinking through the ramifications. There are some long term ramifications to any loans and private loans can run the gambit.</p>
<p>* Our loans allow the co-signers to be released after 36 continuous payments*</p>
<p>Yes, the parents are off the hook after 3 years…the struggling newish grad is on the hook for 10.</p>
<p>There are very few schools, majors and careers that would justify private loans for students…maybe needing to go to a top Ivy for Finance with job prospects on Wall Street…because their starting salaries are high and those jobs do care about where you went to college. </p>
<p>Newish grads just don’t earn that much, and rarely does attending a particular school make a difference in salary. Even engineers, who have high starting salaries, don’t get get paid more because they graduated from Pricey U rather than their instate flagship. </p>
<p>The points made against co-signing aren’t solely based on what’s risky for the parents. Some of the more important points have been that the students end up struggling (drowning) with debt for a very long time. </p>
<p>Students aren’t often savvy enough to realize how much of their incomes will end up going towards fed, FICA, and state taxes and other personal expenses. They’re single and get hit hard with taxes, and they’re used to parents paying for many of their living expenses. They don’t realize that out of maybe a $50k salary, they’re going to actually “take home” much, much less…and then they’ll have to pay for rent, utilities, phone, car, gas, car insurance, cable, food, etc. </p>
<p>And, students don’t realize how quickly they are going to tire of making those large payments each month…especially when they see that their colleagues (many who probably went to lesser schools) who don’t have those loans are able to move on with their lives…buying homes, etc. </p>
<p>Just making the payments for $27k in Stafford loans is going to be a pain.</p>
<p>I learned in business school not to fear debt, oas long as you manage it properly. S I look at it as a source of funds, not as something evil.
There’s no reason to summarily knock out private lenders. It depends on what they are offering and what your kid anticipates doing after school (the same consideration as should be made for Stafford loans). Way too many factors to weigh before saying “no way.” There are ample information and tools out there for you and he to make confident decisions up front.<br>
As for whether the school matters, I generally agree that it doesn’t. For example, when you’re competing for that finance job in Oklahoma City, your degree from Harvard isn’t likely to give you enough of an advantage over a degree OK State. Having said that I’ve read lots of excellent articles recently that rank schools based on their return on investment. They make a strong argument that the school can indeed result in a greater payoff (on average).</p>
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<p>Do those article cite studies that control for the entering characteristics of the student body? If so, can you provide references?</p>
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<p>Oh really? I’m not sure I’ve ever seen any claims like this or data collected that would support a return on investment theory over the ten (or more) year pay back rate on student loans. Starting salary bands are very narrow by position by industry and not even calibrated necessarily in line with cost of living by region so any claims on return or college expenditure would have to be predicated on job placement by industry…NACE collects probably, in my opinion, the best data but it’s by subscription and even that would be difficult to parse and make ROI claims.</p>
<p>Starting salaries have more to do with REGION than undergrad choice. A new-hire engineer in Huntsville, AL may start at $60k, while the same engineer may start at $65k in another region with a higher COLA. The $65k salary does NOT mean that the employee now has an extra couple thousand per year to put towards student loans. The higher pay is just a supplement to cover the higher cost of housing/taxes/etc for that region. The employee ends up with about the same discretionary income. The undergrad the student attended makes NO DIFFERENCE. </p>
<p>Some debt shouldn’t be feared. I don’t fear my home mortgage. I always have some concerns about the mortgages on my investment properties. All debt is not equal. Some types of debt are fine. Some is necessary. Some is risky - but justifiable. Some is risky and avoidable. And some debt is outright crazy. Most private student loan debt is avoidable. </p>
<p>Klpawl…you may think that cosigning private loans so that your son can attend American Univ, is going to result in a higher paid salary (not influenced by COLA), but there really aren’t any facts to support that. How much is your child borrowing each year for Stafford loans and private loans?</p>
<p>A lot of people are suggesting that a parent, if they can afford it, should pay their child so they don’t have to take on debt, but I don’t see why they should, or in some cases how they can. I’m intending to study medicine in the US, which will lead to around 240k of debts, just from the fees alone. My dad has a very high salary, but I have three brothers and that would be all the families expendable income gone just for one of us.
More to the point, Once you’re 18 and the education you’re getting is optional and will help your future, I don’t think it’s your parents’ responsibility to pay for you anymore, especially when you can, through loans, pay for it yourself.</p>
<p>On a different note, I don’t understand why there isn’t a better loans system in the US, as we have here in the UK. Shoudn’t there be the provision for all students to go to whatever college they like, then pay back the fees with a very low interest rate, but only when they’re earning enough, my mum’s never payed hers off. It just seems like a very basic service that has been neglected.</p>