On October 26, The Wall Street Journal published an article titled, “New Peril for Parents: Their Kids’ Student Loans,” which investigates the consequences of parents and other relatives co-signing younger people’s student loans. Student loans—including older Americans’—are a growing problem for those who are looking for help from a Las Vegas bankruptcy lawyer. Here are five lessons from the article.
(1) Always think twice or more times before co-signing someone else’s student loan. The U.S. economy is not currently creating a lot of jobs that require actual college educations, and millions of Americans have college degrees but are working in jobs that do not require them. Millions more are currently unemployed and living with relatives. The increased earnings that come about from higher education very frequently do not materialize.
(2) If you are considering co-signing a student loan, note whether it’s a federal or private loan. The difference is critical because federal loans have easier terms, and if the original borrower dies, the federal government will cancel the loan. Private lenders aren’t so compassionate.
(3) Illness and other unpredicted disasters are the bane of co-signers. One theme that popped up in the WSJ article was debtors being forced to quit work due to medical illnesses or taking on the responsibility of caring for another family member. Private lenders in particular do not care whether the original debtor has an understandable reason for leaving the workforce. They will demand payment from the co-signer.
(4) Co-signing loans can create generational rifts within families. Some of the younger debtors in the WSJ article stopped paying on their loans, leaving their parents or even grandparents in the lurch. It sounds callous, but denying children their dreams might work out better than paying away one’s retirement income to banks.
(5) Relatedly, co-signing student loans can force older co-signers to sell their homes and move in with other family members, including their own parents. In some cases parents had too many student loan debts to co-sign their kids’ loans, leading to grandparents co-signing and paying out of their Social Security when problems arose.
Needless to say, the ability to obtain an “undue hardship” discharge of student loans is very difficult for debtors and co-signers alike. If you co-signed a student loan and you’re now responsible for making payments, and if it’s a burden to you, consult with an experienced Las Vegas bankruptcy attorney to explore your options.
For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Haines & Krieger Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-880-5554 to set up your free consultation.