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Cosigning Student Loans?
Old 06-15-2019, 09:09 AM   #1
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Cosigning Student Loans?

Granddaughter is off to an expensive school this fall. DIL asked DW if we would consider cosigning her student loans as DS/DIL credit is poor.

A a general principal I consider cosigning loans to be a bad idea. No need to discuss that here.

But ... I didn't think cosigning was necessary for student loans. A little poking around the internet tells me that it is not for government loans but possibly is for private loans.

Has anyone run into this? If there are government loans, why are private loans even in the picture?
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Old 06-15-2019, 09:31 AM   #2
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Not sure but my SIL co-signed on his sisters student loan, so I don’t think it’s uncommon. Guess what - she’s not paying and they’re after him now.

So, like any co-sign, don’t do it if you’re not prepared to pay it.

For SIL, it’s causing all kinds of family issues. I guess when he signed it his dad said he’d take care of it if any problems arose. Now, for other reasons, him and his dad have had a falling out. Guess who’s not stepping up to pay the student loan - that’s right, dad. Whole thing sucks. Be careful.
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Old 06-15-2019, 09:40 AM   #3
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Government loans don't always cover all the costs.
I cosigned for my son for a private loan for his last college semester 6 years ago.
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Old 06-15-2019, 09:47 AM   #4
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Not sure but my SIL co-signed on his sisters student loan, so I donít think itís uncommon. Guess what - sheís not paying and theyíre after him now.

So, like any co-sign, donít do it if youíre not prepared to pay it.

For SIL, itís causing all kinds of family issues. I guess when he signed it his dad said heíd take care of it if any problems arose. Now, for other reasons, him and his dad have had a falling out. Guess whoís not stepping up to pay the student loan - thatís right, dad. Whole thing sucks. Be careful.
My thoughts exactly. Lots of financial and relationship downside. I'm just trying to get smarter on the situation. Neither DW nor I consider this to be a good idea, but what we don't know is whether it is even necessary.
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Old 06-15-2019, 09:52 AM   #5
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The worse part is you’re damned if you do and damned if you don’t. Saying no creates other relationship issues. Feel bad for you.
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Old 06-15-2019, 09:59 AM   #6
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I co-signed for DD's private student loans. She earns her Doctorate in December and is already earning half of the highest salary I ever earned so I'm not too concerned I'll get stuck. Plus, she's eligible for the 10 year forgiveness (fed loans - not private) since she works in education.
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Old 06-15-2019, 09:59 AM   #7
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The worse part is youíre damned if you do and damned if you donít. Saying no creates other relationship issues. Feel bad for you.
Well, we'll see where it goes. One option is to simply contribute some money towards college expenses. Another option is to simply ignore the inquiry and hope it goes away. We'll see.
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Old 06-15-2019, 10:07 AM   #8
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My thoughts exactly. Lots of financial and relationship downside. I'm just trying to get smarter on the situation. Neither DW nor I consider this to be a good idea, but what we don't know is whether it is even necessary.
It may be necessary. You can't just borrow as much as you want/need from the government; there's a federal loan amount allocated as part of the financial aid package you're offered, and if that package doesn't pay the total cost of school, you either don't go to that school or you take out private loans.

As you consider whether to cosign or not, you should get a copy of the FAFSA they filled out, the results, and the aid package the school offered so that you have a full picture of the situation and know about all the loans she's taking on. I also think you should sit down with your granddaughter and talk this over with her. She's the primary borrower, not her parents who have the bad credit score, so she needs to understand her responsibilities and the consequences if she fails to pay back the loan.

Another option: do you have the funds to act as "the bank of Grandpa" and lend her the money yourself? You can still have her sign a promissory note and charge her interest, hopefully less than the bank would. You'll have to figure out if that's something you would want to do and whether you could do it for any other grandchildren.
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Old 06-15-2019, 10:34 AM   #9
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As you consider whether to cosign or not, you should get a copy of the FAFSA they filled out, the results, and the aid package the school offered so that you have a full picture of the situation and know about all the loans she's taking on. I also think you should sit down with your granddaughter and talk this over with her. She's the primary borrower, not her parents who have the bad credit score, so she needs to understand her responsibilities and the consequences if she fails to pay back the loan.
^^This! At the very least you are entitled to the complete picture.

I don't know your finances, how close you are to this GD, and how many other grand kids you have, so it hard to give you advice. If it were me, and I had only 1 or 2 grandkids, I would probably gift $15k/yr, doing the same for the other when the time came. But that is me, and it would not be a financial hardship for us.
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Old 06-15-2019, 11:03 AM   #10
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... One option is to simply contribute some money towards college expenses.
Good option. I'd keep it in-house. I wouldn't want to have the gov't or loan company coming after me if something went wrong. Wouldn't want to even think about the possibility of any legal action. Anyhow, that's how we did it with our kids--kind of "pay as you go." Worked out just fine.
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Old 06-15-2019, 12:25 PM   #11
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My question would be why an expensive school if they can’t afford it? What will be her major and future earnings potential?

Why isn’t she going to a community college the first 2 years then transferring. I would not co sign a loan when her own parents aren’t financially sound. What would make you believe your DGD will pay the loans back?

Student loans Never go away, and far to many kids don’t understand how overwhelming a 100k of debt can be at their age. Poor choices can have lasting effects.

PS loan forgiveness is a joke. A little research is in order there.
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Old 06-15-2019, 12:41 PM   #12
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Very few loans actually get forgiven. They keep changing the rules and all sorts of questionable tactics are being used. Sounds to me that she needs to pick a school she can afford.
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Old 06-15-2019, 01:03 PM   #13
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My question would be ...
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... Sounds to me ...
Thanks to the other posters for being responsive to my request for information. Had I wanted advice I would have asked for it.
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Old 06-15-2019, 01:39 PM   #14
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There are limits to government loans; I am not sure of the exact numbers but it is something like $5k for freshmen, $6k for sophs, $7k for juniors, etc. There is also a total limit on loans in the first 4 (5?) years or so. This is for both subsidized and un-subsidized loans
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Old 06-15-2019, 01:49 PM   #15
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My question would be why an expensive school if they can’t afford it? What will be her major and future earnings potential?

Why isn’t she going to a community college the first 2 years then transferring. I would not co sign a loan when her own parents aren’t financially sound. What would make you believe your DGD will pay the loans back?

Student loans Never go away, and far to many kids don’t understand how overwhelming a 100k of debt can be at their age. Poor choices can have lasting effects.

PS loan forgiveness is a joke. A little research is in order there.
+1

Bad idea all around. Unless you plan to cover her education as a gift in the end.I'd strongly suggest that, unless she has very outstanding academics, to consider a more modest school, and she proves herself first in being able to handle the academics.
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Old 06-15-2019, 01:51 PM   #16
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There are limits to government loans; I am not sure of the exact numbers but it is something like $5k for freshmen, $6k for sophs, $7k for juniors, etc. There is also a total limit on loans in the first 4 (5?) years or so. This is for both subsidized and un-subsidized loans
Hmm ... I didn't realize that. Those are pretty small numbers and may explain the request to us. So apparently these really big debts that we hear about are primarily private loans.
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Old 06-15-2019, 02:11 PM   #17
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There are limits to government loans; I am not sure of the exact numbers but it is something like $5k for freshmen, $6k for sophs, $7k for juniors, etc. There is also a total limit on loans in the first 4 (5?) years or so. This is for both subsidized and un-subsidized loans
My younger son just received his 2019-2020 Financial Aid Award Letter. He'll be a junior this fall.

Achievement Academic Award $1500
Max Direct Unsubsidized Loan $7500.

Assets and FAFSA made us ineligible for subsidized loan. The govt loan is totally his, I do not sign anything.

Fortunately he picked a reasonably priced state school that costs about $21K per year.
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Old 06-15-2019, 02:17 PM   #18
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It's bad manners to ask for someone to co-sign. The parents should have thought about maintaining proper credit which is an indication of both character and capacity to pay.

Student loans in most situations are a product of the devil. Scholarships, the GI Bill, working and going to college part time, community colleges are alternatives to having to take out student loans.

The only time I would co-sign on any loan is on a kid's first automobile. At least then, you can recover the collateral if they don't pay.
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Old 06-15-2019, 02:36 PM   #19
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^^This! At the very least you are entitled to the complete picture.

I don't know your finances, how close you are to this GD, and how many other grand kids you have, so it hard to give you advice. If it were me, and I had only 1 or 2 grandkids, I would probably gift $15k/yr, doing the same for the other when the time came. But that is me, and it would not be a financial hardship for us.

It's been a few years since I filled out a FAFSA and I still bear the scars. Does anyone know if the student would have to report the gift on next year's FAFSA application?



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Old 06-15-2019, 02:57 PM   #20
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Thanks to the other posters for being responsive to my request for information. Had I wanted advice I would have asked for it.
You forgot to add "And get off my lawn"....
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