When it comes to getting a student loan to finance your college education, you may face a dilemma. Many private student loans require a co-signer. Because some financial planners discourage parents and grandparents from co-signing on student loans, you may find it difficult to find a willing party when financing education. However, if you know you are entering a solid career and are a conscientious person who will pay back what you owe without leaving your loved ones to pick up the tab, it can help you get the financing you need. By taking out a life insurance policy equal to the amount you owe in student loans you will be protecting the co-signer in case you pass away while owing money on the debt.
- Understanding the arguments against it
Before asking a parent or grandparent to co-sign a student loan, consider the warnings they hear about why financing education that way is a bad idea. According to an article by the AARP, senior citizens are the fastest group of people who have college debt. Senior citizens in the U.S. hold $43 billion in student loan debt. Private as well as federal student loans aren’t discharged in bankruptcy. If you don’t pay your student loans, your parents or grandparents may have their Social Security docked. You shouldn’t ask a relative to co-sign a student loan unless you intend to pay the loan back yourself.
- Having a plan with numbers
According to an article by International Student Loan, it’s good to have a plan before asking someone to co-sign a student loan. You should write down exactly how much money you need to borrow as well as your estimated monthly payments. In addition, have information prepared about the starting and median salary for people who complete degrees in your field of study. It also doesn’t hurt to have a backup plan that explains how you will pay your student loan debt if you can’t complete college for one reason or another.
- Meeting with a lender
If your parent, grandparent, sibling or significant intends to co-sign a loan, go together to talk to a lender. Bring with you information including social security numbers, birthdays, addresses, email addresses and any other information. You should print out an online application so you can read the fine print together. According to an article by Bankrate.com, federal student loans allow a “death discharge,” which means no one will be responsible for the debt if you die. However, with a private student loan, the co-signer bears the responsibility. A life insurance policy, according to Bankrate.com, is your loved one’s protection.
If your loved one refuses to co-sign your student loan, don’t nag or persist. Instead, think of other ways they can help. Some parents or grandparents may tap Roth IRA accounts to help pay for college tuition. Your grandparents may agree to gift you money for college by taking it out of a future inheritance. Some people rather contribute financially with cash instead of serving as a co-signer. If someone asks you to co-sign a student loan, remember you need to protect your own interests as well.
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