The distribution of college financial aid offers has been completed, and the customary deadline of May 1 for graduating high school students to choose their institutions is drawing closer. That means that all across this great land of ours, grandparents are being harassed by college hopefuls who are keen to leverage their parents’ or grandparents’ stellar credit. Co-signers are often needed for private student loans but not federal student loans. If the student’s parents do not have strong credit or are not prepared to co-sign the loan, the student’s devoted grandmother may be requested to do so instead.
Grandparents Should Usually Decline. Why?
Grandparents’ credit scores may be affected by the loan. Late payments can damage grandparents’ credit scores and lead to collection calls, lawsuits, wage garnishments, and bank account liens. To maintain their credit, grandparents may have to take over payments, jeopardizing their retirement. According to the Consumer Financial Protection Bureau, older adults with school loans are more likely to forego prescription drugs, doctor’s visits, and dental treatment because they can’t afford them. Older Americans increasingly carry debt from educating the younger generation. The CFPB reported 2.8 million 60-year-olds having school loans in 2015. From $12,100 to $23,500, their average debt increased. According to the CFPB, roughly 3 out of 4 borrowed for their descendants in 2014. Sixty-eight per cent borrowed money for a child or grandchild’s education, and 5% borrowed for their own or a spouse’s education. Lori Trawinski, a certified financial planner and head of banking and finance for AARP Public Policy Institute, says grandparents co-sign loans to help their grandkids pay for college. They donned valise. They’re liable for the debt. Trawinski says that surprises people. “They didn’t know.” Co-signers often risk more than they think. College dropouts are standard. Without degrees, they earn less and have more excellent unemployment rates, making student loan repayment difficult. Private lenders require student loan co-signers. No, the grandkids can still go to college, but they’ll have to find a cheaper school or use federal student loans, which don’t require co-signers.
The Following Are Some Measures To Limit The Extent Of Any Potential Damage:
Keep an eye on your credit. Co-signers may only be informed if a payment is on time. They may be informed once the loan has defaulted and collection efforts have begun. A drop in credit ratings may be the first sign of something wrong. Take over payments. If you are in a financial position to do so, you should make the payments first and then ask the student to compensate you. You will be able to monitor the timely delivery of payments this way. Put in a request to be let go. According to Trawinski, in most cases, a co-signer can be released from the loan once a predetermined number of on-time payments have been made. You should be able to find the relevant information in the contract for your student loan, or you can phone the loan service.
If the loan is sent to collections: Explore settlement. If it is evident that you will not be able to pay the face amount of the private student loan, you may be eligible to settle the debt for a lesser sum. You should be aware that the settlement process can cause additional harm to your credit scores. Discuss with a bankruptcy attorney. It is pretty challenging to get rid of student debts through the bankruptcy process. You may be considered “judgement proof” if you do not have assets other than cash for your retirement and your natural source of income is Social Security and pensions.
This indicates that the creditor will be unable to collect anything from you, even if legal action is taken against you. You are in a much better position than folks who take out federal student loans, even though this is a terrible scenario. These types of debts are rarely able to be addressed, and the government possesses exceptional collection capabilities, including the ability to withhold money from beneficiaries’ Social Security benefits.