This is the time of year for teary eyed send-offs for our future leaders entering college as freshman. As a parent, the emotions take hold and you could do something stupid--like cosigning for a student loan.
Congratulations! You have officially stepped onto a financial land mine.
Student Loans have replaced the mortgage insanity of 2004-2008. Anyone can get a student loan. Anyone. Enroll in a school and you will be showered with student loan offers. Does your precious loved one need additional money to live on before he or she graduates? No problem, more money will be forwarded by the loan facilitators. Or, there is change in studies to underwater aquatics and requires additional funds. Rest assured the student loan money tree will keep on giving.
It’s like making a deal with the devil. The lenders dole it out easy and quick. So easy, the youngsters are often surprised at how much they owe after graduation.
The amounts outstanding on student loans are ridiculous. One high school music teacher owes over $160,000 (yes, that is the correct number of zeroes). A mother took out loans for almost $170,000 to help her son obtain his engineering degree. A registered nurse graduated with $130,000 of school debt.
Why so high? Loans are also handed out to help with the student’s living expenses, which compounds their already mounting obligation.
No matter what the circumstance, the student loan facilitators expect repayment. More than one mom and dad depleted their savings or skewed their budget when their precious loved one dropped out of school. Or, informs them after graduation he or she cannot possibly make the $900.00 a month payment.
There are consequences to ignoring a student loan bill. Stop making payments and your credit is trashed. Defaulting on a student loan eliminates any eligibility to purchase a home or receive a decent interest rate for a car. Delinquent student loans will remain on credit reports forever. They cannot be included in a bankruptcy unless a severe hardship is proven.
What are the options? This is a conundrum. Most desirable jobs require some type of degree. Over the years, interstate tuitions have increased dramatically. For instance, ASU’s tuition has almost doubled since 2005.
We all want to help our kids. Consider yourself warned--parents should think twice before cosigning or taking out student loans until decisively aware of the financial dangers.