Many parents feel an obligation to send their children to college so they can enjoy a higher quality of life and better job opportunities. In many cases, parents lack the funds to send their children to college. This is especially true now, as tuition has risen across the country for the last decade. Some of these parents may cosign student loans for their children, putting them on the hook for repayment.
CNN recently wrote an article on the story of a Virginia couple forced to put their retirement on hold. The couple cosigned loans worth over $150,000 for both of their sons to attend college.
One of the sons has $129,000 in student loans but works as a bartender. With such a massive balance, the recent college graduate is unable to afford the $744 in monthly payments. If he were to default, it would have severe consequences for his mom and dad. To avoid defaulting, the parents are making the $744 in monthly payments, which is having a significant impact on their ability to save for retirement.
Parents with both private and federal loans can suffer serious consequences by cosigning loans. Some parents use federal Parent PLUS loans to put their children through college. Unlike many types of federal student loans, Parent PLUS loans are not eligible for income-based repayment options.
Another Reason We Need Student Loan Bankruptcy Reform
Not all parents who cosign loans will end up in a student loan horror story, but there are possible financial consequences that should also be taken into consideration.
When we discuss bankruptcy and student loans, much of the discussion centers on how millennials will benefit by being able to start taking place in the larger economy, such as by buying homes and starting businesses. However, we also need to discuss more often how entire families are affected by debts that have a history of being difficult to discharge in bankruptcy.
To learn more about how student loans can be discharged in bankruptcy, please continue to explore our website.