When it comes to debt, cosigning your kid’s student loans is one of the most dangerous things you can do.
You take on all of the risks of the liability, including potentially being sued, but personally reap none of the rewards.
And these types of loans are especially burdensome. The student loan default rate in the U.S. was 11.5 percent between October 2013 and September 2016.
That means more than one in ten student loan borrowers end up ruining their own credit for at least seven years — but often much longer due to interest and penalties on the overdue amounts.
And for every one of those loans that had a parent cosigner, said party’s credit also gets dragged into unsavory territory by the borrower’s defaulting.
What’s worse: Experts have said that the proportion of student loans heading into defaults is accelerating due to a confluence of factors including perpetually rising tuition and — more recently — the resumption of interest rate increases.
Plus, the average student loan borrower owes over $37,000, making it clear why parents may not want to cosign.
Just Say “No”
But telling your child that you don’t want to be involved isn’t easy.
To help you manage that conversation, here are some tips for saying “no” to cosigning your kid’s student loans.
Children often aren’t aware how being a cosigner will impact you. For example, they might not know that it affects your credit score and restricts your ability to borrow.
You Can’t Afford the Payments
Additionally, they may need to hear that you can’t afford the payments if they default, something that is a real risk.
Further, if you don’t have a great credit score, being a cosigner might actually hurt instead of help them if they are looking at private loans.
Ultimately, informing them as to why you can’t cosign can help the situation.
It lets them know it isn’t personal, it’s just a matter of maintaining your financial well-being.
Be Definitive About Not Cosigning Your Kid’s Student Loans
While explicitly saying “no” isn’t easy, hedging on the matter won’t help.
If you aren’t clearly refusing, they may think there is hope and try to convince you. This can lead to an awkward conversation and even frustration.
Instead, make sure your position is completely understood. Actually use the word “no,” and don’t use phrases like “I don’t think I can” or “I don’t know if I should” that come off as ambiguous.
Let them know that you won’t change your mind, and reiterate your reasons if you feel that’s necessary.
Yes, it’s hard to blatantly refuse, but it can be the best approach.
Not A Parental Responsibility
Ultimately, it isn’t a parent’s responsibility to cosign for a student loan.
If your child is struggling to fund their education, recommend that they get a job, explore scholarships, or even choose a less expensive school.
Being a cosigner isn’t a burden you have to take on, so feel free to say “no” if that is in your best interest.
Have you considered cosigning your kid’s student loans — and if so, what did you ultimately decide? Tell us about it in the comments section beneath this post.
Looking to learn more about student loans? Check out these articles:
- How to Pay Off Your Student Loans in Less Than 10 Years
- Will Student Loan Debt Keep You from Buying a Home?
- Forgive Student Loan Defaults, Add $1.5 Billion to Economy
- How to Use Online Resources to Save on Your Student Loans
- Who is Betsy DeVos and What Does She Want to Do to Your Student Loan Debt?
- Do These Things Before Repaying Your Student Loans
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