In a month or so, many high school seniors will be walking across that stage to get their diplomas and mark the milestone in life that is high school graduation. Moms, dads, grandparents, siblings, family and friends will be there to cheer on their high school seniors and offer their warm congratulations and best wishes. Many of those graduating seniors will be college bound come the fall. After the revelry subsides and as the focus moves forward towards the freshman year of college, many of these families will be trying to figure out how to pay for that college education. Indeed, this process may have already begun for many of these families.
For many families and students, paying for college means student loans. A post-secondary education is costly. Few families or students can afford to pay out of pocket for all the tuition, fees, housing, and other costs of higher education. But, students and their parents are often limited in the amounts they can borrow. Sometimes these amounts are simply not enough to cover all the expected costs. So, it seems logical to turn to grandparents to borrow or co-sign the necessary loans to make up the balance needed.
The Problem with Co-Signing
So, what’s the problem? Many grandparents are reasonably financially sound with reliable retirement income or assets to support them in their later years. And, in many instances, merely co-signing a loan does not create any immediate fiscal responsibility for the grandparent. Little Sammy or Susie will pay back the loan after graduation and all will be well. After all, who doesn’t want to help their grandchildren succeed in life?
If you have ample income and assets, maybe there is no problem if Sammy or Susie subsequently defaults on the student loan. But for grandparents of more modest means, helping little Sammy or Susie can turn into a nightmare if Sammy or Susie defaults on that loan. In such a circumstance, the grandparents are left holding the bag. If the defaulted loan is a federal student loan, Social Security benefits can be tapped to re-pay the loan.
A Deeper Issue
Grandparents with student loan debt is a growing problem. According to the Consumer Financial Protection Bureau, older consumers owed a total of $66.7 billion in student loans in 2015. Alarmingly, people aged 60 and older are the fastest growing age group in the student loan market. These loans can have severe consequences for grandparents and can substantially affect grandparents’ ability to care for themselves.
So, if you are a grandparent and you’re being asked to co-sign or take out a student loan, proceed with caution! At a minimum, you should assess the possible consequences of the loan should your grandchild default on the loan in the future. If you grandchild defaults, what are the loan payments? Can you afford to make these payments? Can you handle the stress of being the subject of debt collection attempts and lawsuits if the loan defaults? What field of study is your grandchild entering when he/she enters college? What is the job outlook for that discipline? Is your grandchild likely to find a post-college job earning enough to re-pay the loan? As with all things in life, thought before action is the wise course here.
If you’re already in this situation, your best bet is to seek the advice of competent legal counsel. You should never ignore a debt collection matter or a debt collection lawsuit. If you do, you will make matters worse for yourself by limiting your available options. If you owe debts that you cannot afford to pay or pay on time, contact our experienced attorneys. We offer free initial consultations to discuss your options with you.