Asked to co-sign a college loan

parentologist
Sun, 27 Dec 2020 21:34:40 +0000

This is a HORRIBLE idea. No. Just flat out no.

PLUS loans are available to the maximum of whatever college costs, IF the parents have decent credit. There is no income screen. All you have to do is have decent credit. So why can’t the parents manage their own borrowing for college? Because they don’t have decent credit. So they’re not going to pay off this loan, either.

If your husband wants to pay some of the relative’s tuition, and you guys have oodles of money, and can afford to do this without jeopardizing all your other financial commitments and your retirement planning, okay. But otherwise, NO.

You can fully expect that you will be on the hook for paying off the ENTIRE loan, with all the accumulated interest. So, if you wanted to gift the young person money, would you do it as just paying his tuition now, or as taking a loan (with points, and high interest, and accumulating interest), that could totally ruin your credit rating if you don’t pay it off?

There are other issues. When parents borrow money to pay for their children’s college, they make a deal with the kid. Where the kid goes. How much it’s going to cost. Whether their major will lead them to gainful employment and self-sufficiency. Are they making progress towards the degree? You will have none of this, in co-signing this loan.

Just in case your husband doesn’t understand, he is NOT just co-signing the loan. He must FULLY expect that he will wind up paying off the entire loan. If he has any notion that the kid or the parents will pay a penny towards this loan, he needs to let that go immediately. Anything other than a flat out gift of tuition payment, no strings attached, will be one thousand percent guaranteed to lead to a rift in the family. The kid and his parents will be ashamed that they can’t/won’t/don’t pay off the co-signed loan. Not ashamed enough to pay the loan off - they will have other purposes for their money. But ashamed enough that they will cut off all contact with your husband. They will probably twist it around in their minds in some way that will allow them to portray to themselves and to everyone who will listen that your husband is the villain, too.

If you think this is unlikely, think again. The answer to this is either just pay some of the kid’s tuition, or don’t, depending upon what you can afford. But do NOT let your husband co-sign a loan for the tuition.

If you need a good excuse, he should tell them shamefacedly that his credit is not good, and that you’re trying to fix it, and your financial advisor has forbidden both of you to take on ANY more loans - just make up some story if your husband won’t just say no, that turns it into, we would if we could, but we just can’t. But whatever you do, do NOT let him cosign this loan. This is the sort of thing that could destroy your own finances, and your own marriage, if he were to do this. It’s financial infidelity.

Thank goodness he’s been straightforward with you about this thus far, and didn’t just go ahead and cosign it already, leaving you with a very nasty surprise. I’d praise him and thank him for this, and then the two of you decide whether you should contribute, and if so, how much, as a direct tuition payment, and if not, how to tell them that you guys are just in no financial position to help.