This is the worst financial mistake a grandparent can make


Washington Post, April 2, 2018

In a month, high school students nationwide will make the final decision about where they want to go to college.

And then comes the reality.

They’ll realize they don’t have enough money to attend the college of their choice without borrowing — in some cases, heavily.

My advice: Meemaw, nanna, grandma, Big Mama/Papa, granddad, Pops, don’t do it. Don’t co-sign for a student loan.

Read this from Investopedia: Seniors: Before You Co-sign That Student Loan

“It seems like such a harmless endorsement: Co-signing a student loan for dear, sweet Madison, the apple of your grandmotherly eye,” Anne Mollegen Smith writes. “Of course, you want her to go to college; of course, you’re willing to vouch for her! Too bad you won’t have much spare cash to help her out, now that you’re close to retiring. But it doesn’t take any money out of your pocket to co-sign a loan, so why not give this lovely child the benefit of your excellent credit rating?”

This is why not: If your grandchild can’t or won’t repay the loan, you’ll be fully responsible.

When you co-sign for a student loan, you are not the backup borrower. You are on the line for the entire loan balance should your grandchild not pay.

When seniors default on federal student loans, their Social Security benefits can be docked to repay the debt. As much as 15 percent of your benefit payment can be withheld. If there is a silver lining, it’s this: Your Social Security benefits can’t be dunned for defaulting on private student loans. But the lender can still take you to court to try to collect the amount due.

Read more: Can Student Loan Debt Eat Up Your Social Security Benefits?

“The number of people over 60 struggling with college student loans is snowballing,” reported Gail MarksJarvis for the Chicago Tribune. “For most, the struggle is not a hangover from their own college days. Rather, the strain is coming from helping their children and grandchildren pay for college.”

Read more: The fastest-growing category of student debtors may surprise you: Senior citizens

Older Americans now carry an unprecedented amount of student loan debt into retirement, according to a report released last year by the Consumer Financial Protection Bureau (CFPB). Over the past decade, the number of older student loan borrowers has quadrupled.

In 2015, older consumers owed an estimated $66.7 billion in student loans, the CFPB report said. And although most student loan borrowers are young adults between 18 and 39, folks 60 and older are the fastest growing age-segment of the student loan market.

Read the CFPB report: Snapshot of older consumers and student loan debt

Whether you’re a grandparent or a parent, read this: The alarming consequences of co-signing your child’s student loans

This may help, too: Four tips to help older student loan borrowers navigate common problems with their student loans

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