Think Before You Cosign for that Student Loan

A lot of college students are making their way back to campus to start their semesters.  Many of them have student loans that their parents have co-signed, and who are ultimately responsible for paying off the loan.  Most parents would never think of refusing to cosign a student loan for their child.  However, it's important to note that one should take some precautions before they cosign the loan.  The story of Steve and Darnelle Mason is a cautionary tale of what can happen when the unexpected happens.

The Masons readily cosigned student loans for their daughter, Lisa, who was going to nursing school.  Lisa graduated from her nursing program, got a job as a nurse and was starting to pay off her loans, everything was okay.  Unfortunately Lisa died suddenly and she died with most of her student loans still outstanding.  You would think that those outstanding student loans would have died along with Lisa's passing but that is not necessarily true.  Lisa's loans, that were part of a federal program were forgiven.  However, most of Lisa's loans were from private programs.  Now Steve and Darnelle are liable for Lisa's student loan, the balance remaining being $100,000.  In addition, Lisa's two children now live with the Masons so  the couples expenses have increased.  The Masons make a modest living and were unable to pay off the loan.  Pretty soon because of late fees and interest, that original $100,000 became $200,000.

Declaring bankruptcy would not be a solution because these private student loans are exempt.  The Masons would still have to pay off these liabilities.  They have asked for relief and some of the organizations have reduced the outstanding balance or have forgiven a loan in light of their situation.  The main loan provider, according to the most recent articles, has not gotten back to them.

So how can parents protect themselves in such a case as this?  One solution is to buy term life insurance on their child.  Of course no parent wants to think that their child would pass away before they do, however, if you are thinking of co-signing for a loan in which you would be responsible, protect yourself in the case of an unexpected passing by getting life insurance on your child.