We Cosigned Our Unemployed Son’s Student Loans. Now We’re Screwed

[legendofmax]

<p>Mmarshall876: The issue here is that if you need to cosign for loans, it means you’re not only paying more money, but you’re taking on additional risk during a time when students are having trouble paying back loans to begin with. It’s usually a sign that you’re paying too much for college. An “amicable agreement” is useless if you overestimate your skills/job prospects, take out too much debt, and then find yourself unable to make payments. </p>

<p>It also assumes that your parents are willing to get in the boat, financially speaking. My parents did not save a dime for college and I had to take out Federal / private loans and work during my undergrad years for many hours. To date, I’ve got about $40k left in loans. I attended Wharton, but even then I’m not sure if it all was worth it.</p>

<p>Keep in mind that asset values are taken into account when aid is calculated. You could have a lot of assets and little savings and still get hit with a high EFC that exceeds public loan maximums.</p>

<p>All in all, the point is that people should have a good idea as to how the variance will swing things. You need to be able to absorb the negative variance. If there’s a chance you have to take out private loans to get them cosigned, you should really reconsider if it’s the right school. It also depends on how much money you’re taking out, sure, but there are plenty of great educational options that can be financed cheaply.</p>

[BCEagle91]

<br>

<p>pay cash for a home. A possibility? certainly, but not really
reasonable in our society.</p>

<br>

<p>Homes provide an asset that the lender can take back should the loan
go sour so it is a bit different from the unsecured loan that student
loans are. That said, lenders went hog wild with bad valuations, no
verification of income and 0% down loans which encouraged a wild-west
atmosphere to selling prices and the mortgage industry.</p>

<br>

<p>The maximum amount of government loans an undergrad can get is under
$60,000 - the payments over the 20 year payment period would be the
equivalent of a car payment. Yes, students and parents need to be
taught what their payments will be and how long they will owe that
money, but ultimately they need to make the decision if they feel
the experience and benefit is worth several hundred dollars per
month, the people who borrow $100,000-200,000 either have additional
private loans which they had to prove income and credit worthiness
to receive or they have attended graduate or professional school and
(in theory) should be earning a higher income.</p>

<br>

<p>You still wind up with inflationary effects with loans though - it’s
essentially a way of increasing the money supply and of course you
have inflationy effects.</p>

<br>

<p>The reality is that we have all these kids going to college, and not
enough going into trades. Anyone know how much it costs to hire a
plumber these days? Or an electrician? There is demand for the
trades, but we’re so intent of offering everyone a college education
that kids who would do well in a trade are not heading that
direction, or some are thinking they’ll take a shortcut and learn
their trade in college (or at a for-profit trade school).</p>

<br>

<p>The manufacturers in my state are screaming for kids to go to two-year
community college programs to operate high-tech machinery. British
Aerospace Engineering in our area will provide after-school internships
for Juniors and Seniors in high-school for their manufacturing program.</p>

<p>Manufacturers in our state say that they have no trouble finding
manager, financial, etc. people - they want trained machinists.</p>

[Erin_s_Dad]

<p>

Everyone says get a loan, but no one wants to talk about repayment. You can’t expect your child to carry the burden alone, it’s almost like an investment.

This is pure tripe. Perhaps you and your parents never had this discussion but I know I did with my children. The parent is NOT obligated to cosign anything. The student should pick an affordable option for the family.</p>

[BCEagle91]

<br>

<p>This is pure tripe. Perhaps you and your parents never had this discussion but I
know I did with my children. The parent is NOT obligated to cosign anything.
The student should pick an affordable option for the family.</p>

<br>

<p>I recall one of my sisters having this discussion with my mother three decades ago.</p>

<p>It was a screaming match.</p>

<p>My mother had thought about sending us to social services because she couldn’t handle the stress of raising a bunch of kids on her own.</p>

<p>I think that the student should choose an affordable option but they need to know what their options are and sometimes they aren’t very good. The transition of the economy has been hard on parents and kids that have seen their worldviews change harshly in a short period of time. Those of us that have lived through harsh times expect this sort of thing to happen from time to time so it’s not as big a surprise or adjustment.</p>

[jrcsmom]

<p>OK, the math -</p>

<p>The main debate here seems to be if you must borrow money that college is not affordable, so here’s a little math -</p>

<p>The maximum amount a student can take in govt backed loans for undergrad is approximately $60,000 - actually a little less, but I rounded to make the math easier</p>

<p>If a student without a college degree is able to earn $9/hour (perhaps more or less depending on their locale, but I figured that was a good average for an entry level job with no higher education), then their tax rate per [Average</a> Tax Rate Calculator - SmartMoney.com](<a href=“Online Tax Advice - Tax Preparation Help - Income Tax Tips - MarketWatch”>Online Tax Advice - Tax Preparation Help - Income Tax Tips - MarketWatch) is 15%, so they will net about $7.65 per hour</p>

<p>If a student takes the maximum in loans and opts for an extended 20 year pay period, then per [FinAid</a> | Calculators | Loan Calculator](<a href=“Your Guide for College Financial Aid - Finaid”>Your Guide for College Financial Aid - Finaid) based on the current interest rate the payments will be approximately $458/month</p>

<p>In order for the loans ‘to be worth it’, they need to net $2.64 more per hour than they would if they didn’t pay for the degree. If they can earn JUST $26,000 or $12.50/hour based on the same 15% tax rate from the smartmoney site, they will net enough to pay the loans and still earn what they could have without the degree</p>

<p>Now of course if someone is able to earn that $26,000 without borrowing any money, then anything they earn is just money in their pocket and of course they are better off, but for those that MUST borrow to go to college, they must earn approximately $3.50 more per hour to make taking the MAXIMUM amount of loans worthwhile</p>

<p>Now that does mean that while they are in repayment their pay will be the same as those without a degree. Many parents have taught their children that a college degree equals success and that when they graduate they have earned a better lifestyle, they should be able to go buy a new car, take luxurious vacations, buy a new wardrobe, get their dream condo on the beach, but the fact of the matter is that a college degree is just a key to a doorway that you can enter that others cannot and when you first get that degree and step through the doorway, you are only 1 step away from those on the otherside, how far you go once you enter is then up to you. </p>

<p>But if you believe that a college degree will allow you to earn $3.50 more per hour than you can earn without it, then you are mathematically earning enough to pay for the loans and if you accept that you must still live frugally, then after the loans are paid, that is an additional $458/month in your pocket plus a higher earning potential than you would have without the degree</p>

[CTScoutmom]

<p>Mmarshall876 wrote:

I find it almost a slap in the face, that a parent would think it is uneccesary to co-sign for their child. If you raised your child to be responsible and make an amicable agreement on payment then ok, there should be no problem. I had this problem with my mother, except I knew to pay back my loans timely and she agreed to help me. My brother was one to have my mom on his loan and she got tired of the calls from Sallie Mae and eventually just began paying it to back them off. Eventually that stopped and they hit my brother’s credit. But my problem is hearing parents complain about the loans, yet no one was helping the student when they were facing being dropped from their classes. Everyone says get a loan, but no one wants to talk about repayment. You can’t expect your child to carry the burden alone, it’s almost like an investment. Avoid all of the crisis and just start a savings as soon as possible BEFORE they start college, its that simple.

I find it a slap in the face that a student should have such an entitled attitude that they think their parents must cosign a loan.</p>

<p>An amicable agreement is one where I agree to help my child pay off they are doing their best, but are still struggling to pay the loan off. But it is not my loan, I did not obtain the education funded by that loan. There are students here who complain that parents expect their children to help support them through their retirement - yet they think nothing of asking the parents to make sacrifices to further their own goals.</p>

<p>If you mother cosigned your brother’s loans, they didn’t just hit HIS credit, they hit hers too. It’s one thing to want the phone calls to stop. It’s a whole other thing when they start taking your money, or keep you from buying that new car (because you didn’t replace it when you probably should have because you were making tuition payments).</p>

<p>Yes, discuss repayment, but also discuss who is responsible for that repayment. If you take out $100,000 in loans, presumably it is because you expect a job where you can pay those loans off. The student is the one getting that job, not the parents. If the student can’t get the loan without a cosigner, perhaps the student needs to reconsider, because his ability to repay looks in doubt.</p>

<p>I can and do expect my children to carry the burden of any loans on their own. We will provide money toward tuition, and they will have the federally guaranteed loans which we don’t cosign. That will provide adequate funds to attend most colleges, but not all. If they want that extra, it’s their own responsibility, and THEY will be paying it off.</p>

[CTScoutmom]

<p>JRcsmom, your calculation are somewhat correct (thought the tax rate information has some holes) but few people are willing to wait another 20 years before enjoying the benefit of a better lifestyle - that’s where the problem lies. You’re also not taking into account the number of people taking private loans on top of the guaranteed loans.</p>

<p>BTW, federal minimum wage is $7.25 an hour - your $9 an hour is high for a starting wage. Beyond that, we have set up a tax system the encourages low wage earners to not work, because they lose tax benefits. The only taxes that minimum wage employee pays would be payroll taxes (social security and medicare), and if old enough they get earned income credit. That extra $3.50 per hour is likely to reduce their tax benefits, so they really have even more to make up. </p>

<p>Meanwhile, if they chose a different career path, they might still start at $7.25 an hour, but during their 20 years of repayment make far more than an extra $350. Look at what BCEagle has posted - plenty of people to fill the managerial and financial positions (who have gone to college), and not enough in manufacturing. Nobody wants the “dirty jobs” yet they probably pay pretty well. It’s the same in our area - employers don’t need college graduates. Training yes, college degrees, not so much.</p>

[BCEagle91]

<br>

<p>Many parents have taught their children that a college degree equals
success and that when they graduate they have earned a better
lifestyle, they should be able to go buy a new car, take luxurious
vacations, buy a new wardrobe, get their dream condo on the beach,
but the fact of the matter is that a college degree is just a key to
a doorway that you can enter that others cannot and when you first
get that degree and step through the doorway, you are only 1 step
away from those on the otherside, how far you go once you enter is
then up to you.</p>

<br>

<p>I played 2.5 hours of doubles with a group a few weeks ago. I drove
up in a 2000 Toyota Avalon with 247,000 miles. The host drives a
BMW and we played at the clay court on his property in one of the
most expensive towns in the area. One guy drove up in a tricked-out
sportscar and the other came in a Cooper Mini.</p>

<p>The host went to community college and then state university. He was
unemployed for a year so he just played more tennis (I don’t think
that he needs to work). The guy with the sportscar didn’t go to
college - he owns a construction business and says business is
booming. The other guy doesn’t have a degree but owns a service
business. Ironically, the state university is one of his big
customers. I just have a bachelors and masters.</p>

<p>I don’t know where all four of us are wealth-wise and you certainly
can’t tell based on what we drive but I don’t think that any of us are
hurting.</p>

<p>I have another tennis friend that owns a construction business too
that didn’t go to college. I also know the owner of a bakery without a
college degree and the owner of a pizza shop that doesn’t have a
degree. I think that times have been relatively tough for the bakery
and pizza shop but they’re still in business with many employees.</p>

<p>I’ve always told our kids: a degree is good to have but if a full-time
job comes up, take it - you can always go to school. You can’t always
get a job. Son did just that earlier this year and it absolutely was
the right choice.</p>

[jrcsmom]

<p>@CTScoutmom -</p>

<p>Who pays for college is very family dependent. My dad’s grandmother was well-off financially and wanted to pay for him to go to college. My parents then felt it was their responsibility to send their kids to college. In return, I told my son that I would pay for 100% of his undergrad costs. I once read a CC post from a parent who said that they paid for their child to attend college and all they wanted in return is for their child to pay for their grandchildren. I like that sentiment. </p>

<p>Fortunately my son received substantial merit aid, so for his freshman year, we’re not taking any loans, but I’ve told my son if we do have to take a small amount in Stafford loans before he graduates that myself and his dad will take on the repayment responsibility. I wouldn’t have blinked over co-signing a loan for my son because I see his college expenses as my debt anyway. But to each their own. For those that paid their own way through school, they’ll expect the same of their children. I’m just repaying what was provided me by my family.</p>

<p>And of course my numbers were over simplified, they don’t account for any increase in wages over 20 years, they don’t account for any changes in the tax rate, but the bottom line is for the maximum in govt backed loans to make the $458/month payment, you must net JUST $2.64 more per hour. (And yes that also doesn’t account for private loans, but those loans are based on income and credit worthiness and I’d like to think that those qualifying for $100-200K in loans have considered the consequences and if not, they will when they are forced to face them) My post was speaking of middle to low income students that MUST borrow money to pursue a degree and for them the payments on even the maximum amount of govt backed loans are designed to be ‘manageable’.</p>

<p>@BCEagle91 -</p>

<p>Bill Gates never completed college either, but personally I’m not about to advise my son to drop out so he can become a billionaire. It’s nice that everything has worked out well for those you know, but frankly the odds are not on their side. I’d rather gamble on the fact that my son can earn a few bucks more an hour with a degree.</p>

[BCEagle91]

<br>

<p>Bill Gates never completed college either, but personally I’m not about to advise my
son to drop out so he can become a billionaire. It’s nice that everything has worked
out well for those you know, but frankly the odds are not on their side. I’d rather
gamble on the fact that my son can earn a few bucks more an hour with a degree. </p>

<br>

<p>Bill Gates came from wealth so it wasn’t a gamble.</p>

<p>I don’t think that most are looking to become billionaires. Most would be happy with getting to a million.</p>

<p>I did read The Millionaire Next Door a long time ago and that book portrayed the typical billionaire as a small business owner, in a lot of cases, doing things that didn’t require a college degree.</p>

<p>In the case of my kids, taking a semester or longer to work isn’t a gamble. Son’s job provides tuition reimbursement and we have the savings for four-year privates for both kids. They can always go back to school on our dime or their own.</p>

[SlitheyTove]

<p>

I find it almost a slap in the face, that a parent would think it is uneccesary to co-sign for their child. If you raised your child to be responsible and make an amicable agreement on payment then ok, there should be no problem. I had this problem with my mother, except I knew to pay back my loans timely and she agreed to help me. My brother was one to have my mom on his loan and she got tired of the calls from Sallie Mae and eventually just began paying it to back them off. Eventually that stopped and they hit my brother’s credit

</p>

<p>Difficult to understand what’s written here, but if I’m following correctly: It’s insulting for a parent to not co-sign for their kid, because the parent should’ve raised the kid right and the kid should therefore be responsible and diligent about paying back the loan. Except if the student needs help, in which case the parents should bail you out, either by helping you make the payments or by just giving up and paying them back. :rolleyes:</p>

<p>

You can’t expect your child to carry the burden alone, it’s almost like an investment.

</p>

<p>Sounds like a remarkably bad investment, given the above. </p>

<p>

Avoid all of the crisis and just start a savings as soon as possible BEFORE they start college, its that simple.

</p>

<p>Students always think it’s that simple because they don’t see any other priorities: nothing about having to pay for everyday things, saving for retirement, covering periods when people were unemployed or underemployed or where there were emergencies or unexpected expenses. Not to mention the stock market tanking and dragging down the value of a college savings account.</p>

[justamom_01]

<p>My 84 year old MIL is on the hook for student loans she co-signed for her grandchildren to attend private school. My SIL approached me to co-sign several years ago, and I turned her down. Her mother agreed to sign.</p>

<p>My SIL passed away, but the legacy of co-signing lives on for MIL. Apparently, BIL (married to SIL at the time the loans were taken through her death) never signed for them, so he has no legal obligation to pay.</p>

<p>They’ve threatened her with everything, including garnishing what little retirement pay she has.</p>

[jrcsmom]

<p>^^^^</p>

<p>Yet another risk of private loans. Govt backed loans are forgiven with the death of the borrower, private loans are not.</p>

[BCEagle91]

<br>

<p>My SIL passed away, but the legacy of co-signing lives on for MIL. Apparently,
BIL (married to SIL at the time the loans were taken through her death) never
signed for them, so he has no legal obligation to pay.</p>

<br>

<p>I guess I’m a little weak with In-Law nomenclature but it sounds a bit odd (not saying it is wrong) to say BIL is married to SIL. At any rate, what are the kids that received the education doing?</p>

[cellardweller]

<p>I am frankly surprised with some commenters suggesting that parents should not co-sign for their own children’s education. I can see the argument for not co-signing for distant relatives but not investing in your own family feels to me not only heartless but also shortsighted. </p>

<p>As far as taking loans to support the education of my own children, to me the answer is obvious. I have already cared for them from birth through high school. Now that they possibly need me most I am just supposed to say: hey kids, you are on your own! </p>

<p>My children are part of the first generation that will not do better economically than my generation. I benefited immensely from a growing economy, plentiful labor market, relatively inexpensive housing and cheap college tuition. Now that my kids are getting squeezed , that tuition costs have gone through the roof, that jobs are scarce and housing unaffordable I am supposed to tell them tough luck! Sure, our 401k took a hit and turned into a 101k as it did for most families, but that does not mean i should make my kids pay for my losses. </p>

<p>So what if I have to retire later or work until I keel over! What’s the big deal about cutting some other expenses, keep our cars longer or if my wife has to continue working for a few more years! If our kids are struggling financially, our entire family will feel the effect. We have two daughters and if they can’t get decent jobs, they won’t be able to form their own family units any time soon. That means no grandchildren for me and my wife to spend time with while we can still enjoy it. If we don’t help our kids now, who is to say they will want to help us when we are older? Under the same reasoning, they will make the calculation that it is less burdensome on them to have us in a retirement home rather than live nearby and have us share in their lives. What goes around comes around!</p>

<p>If anything, I am probably making the single best investment I will ever make in my life! I am investing im my own children!</p>

[Inpersonal]

<p>To BCEagle
“Manufacturers in our state say that they have no trouble finding
manager, financial, etc. people - they want trained machinists.”</p>

<p>Pay the machinists more than managers and the company will fix the problem, the same way NFL teams pay good players more than they pay the coaches… However organizational culture in U.S. does not favour paying the laborers more than the managers. Therefore, in the long run it is still a better bet to study to become a white collar professional.</p>

[BCEagle91]

<br>

<p>Pay the machinists more than managers and the company will fix the problem,
the same way NFL teams pay good players more than they pay the coaches…
However organizational culture in U.S. does not favour paying the laborers more
than the managers. Therefore, in the long run it is still a better bet to study to
become a white collar professional.</p>

<br>

<p>Promote from within.</p>

<p>Where I work, first-line managers do individual contributor work too - makes for a busy day. Employees, for the most part, manage themselves or use automated systems.</p>

<p>BTW, here’s a random machinery job that I found from one of the many machinery shops in our state:</p>

<p>The person who applies for this position should have a great amount of experience in a Machine shop environment. This person should have experience using Surfcam, and SolidWorks (or similar) software, and an extensive background using “G” and “M” code programming. The person hired for this position will be able to Program, Set-Up, and Operate a variety of Mori-Seiki CNC Lathes. Experience with Prototrak type lathes is a definite plus.</p>

<p>Another machinery company:</p>

<p>Entry level toolmakers can average $27,000 a year during a four-year training program.
Experienced precision metalworkers’ earnings range from $40,000 to $60,000 annually.
Precision machining provides a practical basis for an engineering or business degree.
The gloomy rooms and greasy machines of the past are replaced with computers and high technology.</p>

<p>I think that the current approach may be to pay managers less (as in nothing in not hiring them).</p>

[megpmom]

<p>I don’t mind paying for my kids’ college educations. But I won’t take out loans for that. They must limit themselves to what I can afford out of current income (no savings). Older D took out subsidized Staffords one year, then busted her butt to find another scholarship and worked overtime at waitressing job to avoid doing that for soph and junior year. Between her scholarships, earnings and my contribution, she is getting a college education. I expect the younger will do the same. I guess some people are just more comfortable with debt than I am. The only debt I have to my name is a mortgage and that will be gone in 7 yrs and 4 months!</p>

<p>Btw, I worked in foreign service, and international banking for 20 years and while I have a degree from Northwestern, I worked alongside many public school graduates and they are now doing better financially than me. There is no shame in a public school degree.</p>

[DrGoogle]

<p>Cellar, I like your post, I share the same sentiment, but I really hate it when kids expect parents to pay for college as if we owe them an education. I can’t stand some of the posters who said parents should have contributed when they were born, for some families, they can’t afford to save period, so when I hear that sentiment expressed, my immediate response is I wish that kid was not born.</p>

[cptofthehouse]

<p>Cellardwellar, there is nothing in the world at all wrong with parents borrowing money for their kids’ education EXCEPT WHEN THEY CANNOT AFFORD TO DO SO. The problem is that loans for college are available to some parents who are not eligible for any other kind of loan for those amounts because they have lousy credit, NO INCOME, and other reasons why taking on any more debt is not a good thing. Yet, some student loans might be allowed in amounts that are staggering for someone since income is not taken into account for PLUS DIRECT loans, for example. And then the terms of the cosigned loans are often such, for those with poor credit, very steep. There are parents who are taking these loans without thinking about the future consequences and are protected from taking on such debt under nearly any other situation because they don’t have a chance on earth and other places in paying it back. With the private loans, not only are the parents on the hook, but so are the kids, with both parties suffering under credit problems if neither can repay the loans. They can’t be discharged by bankruptcy as easily which is why these loans are even made, plus these lenders can hit up two people. Students with this monkey on their backs can’t get some jobs, apartments, mortgages, all sorts of things if they and their parents cannot appease the lenders who want their money back. </p>

<p>I know plenty of parents who borrow the money, and it gives them some relief in cash flow in that they can spread the college costs over 10 years instead of 4. In our case, with our oldest, we started payments as soon as the loan amounts were distributed. so we were well on the way of repayment by the time he was done with school. Still, we are paying these loans 9 years later with the first one finally paid up next year. Yeah, it’s a long time, not like a car payment, and that’s just the freshman year loan. 4 more years before he is done and he’ll be in his thirties by then. And we can afford this by any measure. It still hurts.</p>

<p>But a dear friend of mine took out loans to give her daughter what she wanted in an education. First it was some special program, available only at this OOS university. Then the girl switched out of the program, but loved the school, was doing well, and had oh, so many wonderful travel and other opportunities all funded by a combination of student, parent, federal and private loans. That she graduated with a philosphy degree in 5 years was wonderful. That she can’t find anything other than part time work in a coffee shop with $90K in loans coming due is a major problem. And it’s been three years now. It has damaged her mother’s business and job possiblities as well as the girl’s. Try getting a job in the financial industry, or really any corporation through human resources without a credit check. Can’t get a decent apartment, can’t get a mortgage, can’t get much of anything with that hanging over your head. It was all with the best of intentions, but an 18 year old girl is not the one who can understand what this kind of debt means, and then it’s a matter of going through the slicer, slice by slice. Who knows when they should have said “stop”? </p>

<p>The loans are great IF YOU CAN AFFORD THEM. It’s the same age old problem of things that are most available to those who least need them. A family with a low or zero EFC should not be borrowing large amounts or really any amounts for college unless there are truly no other alternatives for the child getting an education. There are some things more important in this world than going directly to college after high school. It’s not the be all and end all , you know. And I say this as a person who has invested great amounts of time and money in education.</p>