<p>Unlike federal loans, they don’t die with you.
[Video</a> - Breaking News Videos from CNN.com](<a href=“Video News - CNN”>Video News - CNN)</p>
<p>Don’t people understand what it means to co-sign something? It means there are two people to collect from!
[Dead</a> college student’s loan forgiven](<a href=“http://www.philly.com/philly/news/new_jersey/20120427_Dead_college_student_rsquo_s_loan_forgiven.html]Dead”>Dead college student’s loan forgiven)</p>
<p>These loans should include some kind of insurance policy that if the student dies or becomes completely disabled (which this student was for 2 years) that the loan is forgiven. </p>
<p>Potential co-signers should also keep in mind that students change their minds about majors or even drop out at some points, therefore the thought that the child will someday become a well-paid engineer or doctor may never happen.</p>
<p>I keep stressing the point. Too many kids and parents think the kid is truly getting those private loans. THey don’t get the rules and reality of cosigning. Though the interest rate may be higher with PLUS, there is the life insurance component in there so that if parent or student passes away, the loan is forgiven. There are also more generous terms for deferral in the case of disability or job loss. Not so with private loans. I know some families whose financial ruin included these loans and they can’t get back on their feet because of them.</p>
<p>This time of year is so stressful for parents. Many have recently rec’d inadequate aid pkgs and no affordable options for Junior. They panic and agree to co-signing loans so that Junior won’t have to go to tell everyone that he can’t afford to attend any of his schools. Maybe the parents partly blame themselves for not saving enough or encouraging true safety schools…who knows. The CC option is often never on the table because they believe that “Junior has worked too hard to have to go to a CC.”</p>
<p>What really shocks me is how many lowish-income parents co-sign these big loans or take out Plus Loans. Are these parents pinning their hopes that their child will become a high paid doctor or atty and support them in their old age??</p>
<p>And the lowish income ones taking out private loans may only qualify the first year or two, and then Junior has to leave the school. Then the kid finishes at the local public, but still has big loans from PriceyU. Ugh!</p>
<p>Yes, Plus has death protections in there, but that doesn’t solve the problems when parents and kids make stupid agreements that the child will help pay the Plus loan, yet the child never earns enough to really do so.</p>
<p>So nice of you wealthier folk calling us stupid for trying to help our children get ahead in life…</p>
<p>
</p>
<p>Well, I know I am.</p>
<p>I don’t think anyone means to call anyone stupid. </p>
<p>And as a relatively well-off (not rich, but doing okay) person–I absolutely get how the pressure this time of year can make parents and students act without having time to really explore the long-term ramifications of large loans. </p>
<p>I’ve seen too many kids in the situation mom2 mentioned–the parents qualify to co-sign for year one or and maybe year 2, but then the student cannot obtain loans for years 3 &4, and comes home to finish at local U, with big loans from private U or OOS U. I think what people are saying is that is not a good situation. I’ve also seen the same thing happen to ‘well-off’ people who lose a job, have sudden large expenses, etc, so it’s not just lower-income folks who can be affected.</p>
<p>I agree that I wish there were insurance available to forgive the loans in the event of death or disability.</p>
<p>
</p>
<p>It will never happen for cosigned loans. The whole point of co-signing is that the cosigning person agrees to pay if the student is not able to pay (regardless of the reasons). Just like any other loan.</p>
<p>People should not co-sign a loan if they have no intention to pay. It is going to sound harsh, but if the private deal is made between a child and a parent that only child will be responsible for paying the debt, then a co-signing parent is committing a fraud by co-signing, because it violates the terms of the deal with the bank.</p>
<p>P.S. One more thing. Those who co-sign (excessive) student loans knowing that it will be hard for them to meet this obligation are not helping their children. They are setting them for the life of slavery to the loan companies. The best way to help a child to get ahead in life is to guide them to affordable options that will minimize debt but will maximize return on investment.</p>
<p>It will never happen for cosigned loans. The whole point of co-signing is that the cosigning person agrees to pay if the student is not able to pay (regardless of the reasons). Just like any other loan.</p>
<p>I don’t agree. There could be insurance somewhat similar to what is offered to those taking out mortgages. A Husband and Wife may be both on the mortgage (co-signers so to speak), and if one dies, the loan is paid off if they have that insurance…even tho the other person (co-signer) is still alive.</p>
<p>Some kind of insurance like that should be offered.</p>
<p>
</p>
<p>IANAL, but it would seem to me that there is no fraud involved, only a misunderstanding that would have no bearing on the result should a default occur and the matter wind up in court.</p>
<p>
</p>
<p>You want insurance, take out a term policy in the amount of the loan, with the other signer as beneficiary.</p>
<p>
</p>
<p>I don’t know what IANAL means, but to me, it is really hard to believe that a co-signer does not understand the point of cosigning, i.e. you agree that you will pay if another person cannot/will not pay. If you made a side deal that you will not pay, then you should not be co-signing, because it will be lie.</p>
<p>*Quote:
but if the private deal is made between a child and a parent that only child will be responsible for paying the debt, then a co-signing parent is committing a fraud by co-signing, because it violates the terms of the deal with the bank.
*</p>
<p>I don’t know if there is “fraud” involved, but you make a good point. </p>
<p>This issue is a problem with PLUS loans and other private loans where there isn’t a co-signer. The parent ALONE is taking out the loan and there is a “private deal” that the child will pay. That may be fraud, I don’t know. Perhaps parents should be made to sign that THEY are fully aware that THEY are legally responsible and that any private agreement between parent and child is not recogized…or some sort of wording to scare these parents into reality.</p>
<p>Annasdad, in terms of “misunderstanding,” there’s still the significant issue that “ignorance of the law is no excuse.” Especially with all the disclosure regulations.</p>
<p>*Are these parents pinning their hopes that their child will become a high paid doctor or atty and support them in their old age??</p>
<p>So nice of you wealthier folk calling us stupid for trying to help our children get ahead in life… *</p>
<p>KKmama: see the problem? There is NO guarantee a degree will help your kids get ahead in life. They need a combo of life skills, wise early experience, AND plenty of luck, or they may be in the same middle of the road (or worse) financial positions they would have been without those loans hanging over their (and your) heads. The degree itself isn’t magic. </p>
<p>If you do expect them to become docs or lawyers, better understand there’ll be loans for that, too.</p>
<p>
</p>
<p>Even if this kind of insurance was offered (geared specifically to this kind of product as opposed to life insurance), I really doubt very many people will take it. Because of my husband’s business, I encounter plenty young healthy guys who don’t even take health insurance through the business (where they have to pay half), because they are young and healthy and have other priorities for their money … until they get drunk one Saturday night and slip and fall in a bathtub and need 20K leg surgery.</p>
<p>I think maybe if the insurance was mandatory, like in a case of FHA mortgage (with PMI), then it might work.</p>
<p>P.S. Maybe I don’t understand the definition of fraud, but if you sign on a dotted line saying that you will pay, but have not intentions to pay, then it is in my opinion a fraud. It does not really matter that you have a side deal that you child will pay, because bank did not agree to those terms or they would not have given a loan.</p>
<p>IANAL -> old-time (CompuServe) term for “I am not a lawyer,” so therefore take my considered legal opinion with the grain of salt it deserves.</p>
<p>“ignorance of the law is no excuse” -> indeed, but people sign contracts they don’t understand all the time. That may be stupidity or ignorance, but it’s not a criminal offense.</p>
<p>
</p>
<p>this is really good thinking, actually.</p>
<p>It’s very inexpensive to get life insurance for someone that age, and if done correctly, is also a great long-terms savings vehicle for one or the other’s retirement.</p>
<p>I think, at times, people are relatively uninformed as to what debt really “means,” long term, and I do believe that lenders prey on those with less experience. I mean, come on, we don’t need to pretend we didn’t see what happened with the predatory home loan debacle we’re still paying for now.</p>
<p>*So nice of you wealthier folk calling us stupid for trying to help our children get ahead in life…
*</p>
<p>??? </p>
<p>Do you really think that most modest-income people think it’s a good idea to co-sign big loans for college? The stats don’t say that. Most kids commute to their local school because that is what is affordable. If most “non-rich” folks thought that co-signing was a safe and smart thing to do, then many of these kids would be “going away” to schools of their choice. </p>
<p>As for the word “stupid”, I don’t think anyone said that on this thread. I do think that many co-signers haven’t thought it all through…how much their kids will be paying back, how their kids will afford to support themselves while paying back these loans, and how the parents will be on the hook if their child can’t. </p>
<p>I know that some parents assume that their child can “live at home” and work while paying the big loans back, but that only works IF the child finds good employment in the hometown and hasn’t become involved with a significant other who he/she wants to live with/marry/whatever. If the job is elsewhere or Junior wants to live with the love of his life, then funding living expenses can trump big loan payments.</p>
<p>
</p>
<p>Or do what the very smart daughter of a friend did - worked full-time as a waitress while going to the local directional U part-time and living at home. Took her six years to get her degree, but she graduated with zero debt and money in the bank.</p>