Will You Get a "Fair" Financial Aid Award?
Well, the truth is -- Most families never find out! They'll simply take what's offered. And many will pay more for college than they need to... sometimes up to tens of thousands of dollars more.
It means you'll want to have all the right information in hand before you decide to co-sign on a student loan.
For starters, when a student cannot pay back their own student loan, the co-signer becomes fully culpable for the repayment – that can be a big extra burden families have to carry if they already have their own mortgages, car payments, or other personal loans.
And for those parents who cannot bear the weight of paying back unexpected thousands after their children graduate, bankruptcy might be the only option.
Keep in mind – even in bankruptcy, student loans are usually not dischargeable without proving undue hardship – a process which makes bankruptcy far more difficult and expensive.
Another note of caution: there are private loans which offer to release the co-signer from responsibility after a certain period of time. Yet it is often difficult to actually follow through on that pledge.
Simply put, parents are wise to exercise great caution before co-signing on private student loans for their children.
First and foremost, you should exhaust every avenue of federal loans, which usually do not require a co-signer.
Federal loans also tend to have much more flexible repayment plans and more options if you do face unexpected financial difficulties.
Now, what if co-signing is your only option, or if you’ve already co-signed on a private loan and your child defaults?
Your best bet is to immediately get in touch with the lender.
First see if they will give you an interest rate adjustment deferment which gives you a temporary pardon from payments without accumulating interest.
You can also ask for a forbearance which also temporarily suspends your payments but still accumulates interest in the meantime.
But do yourselves a favor, trust the College Made Simple and College Planning Network philosophy, and don’t allow it to get to that point.
It is absolutely imperative that you create a financial game plan ahead of time before jumping in and making rash decisions like co-signing on a private loan.
If you do not strategize and lay out specific plans for paying for college, you risk signing away your future financial stability with the simple stroke of a pen.
And remember, if you are forced to co-sign on a private loan, plan to treat it as if you were personally receiving the money for the loan yourself; creditors certainly will.
More to come......
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