Posts Tagged: ‘student loan co-signers’

The Dangers of Co-Signing a Student Loan

May 3, 2018 Posted by kingcade

It has become common practice for parents of high school students looking to enter college in the fall to co-sign or take out private loans to help their children afford the costs associated with a higher education. Many times, the scholarships (if available to the student) have already been maximized, and the financial aid offered through federal loans simply is not enough to cover the complete costs of college.  However, according to a recent study taking on a private loan or co-signing on one to help a child go to college can seriously hurt the parent later when it comes to retirement.

Most private student loans require a co-signer since most high school students do not graduate with well-established credit. Parents will often jump to co-sign, not even thinking of the potential consequences.

“It’s portrayed to them as if they’re going to simply be a reference or endorser, when the truth is they‘ll be obligated to pay this loan if something happens and the primary borrower can’t pay,” said Seth Frotman, Student Loan Ombudsman at the Consumer Financial Protection Bureau (CFPB). “We now see more and more cosigners going into retirement facing unprecedented levels of student debt.”

According to a survey released by the website LendEDU, a site that specializes in student loan refinancing and private student loan borrowing, of the 500 parents who co-signed on their children’s loans, one-third of them did not fully understand the consequences of co-signing. Out of that number, 35 percent of them later said they regretted doing it. More than half of them said their credit scores took a hit after co-signing. More than one-third of them said that the lower credit scores later hurt their chances of qualifying for any financing in the future.

The parent’s credit can be negatively affected if the child later misses payments or fails to pay the loan on time. The survey also showed that more than one-third of the parents picked up the loan payments for their children.

However, what happens if the parent is unaware their child is keeping up on the loan payments? Many cosigners are not informed of the status of their co-signed loans until it is too late- many times to the point where interest had accumulated and fees had been assessed.  The survey also showed that more than half of the parents worried that their child’s student loan debt would jeopardize their retirement plans.

Every student is different, and while some may naturally be responsible, get a job straight out of college and make payments on the loans without any issue, many students fail to understand the responsibility of paying back these loans and are not so fortunate with their job prospects upon graduation.

One option available is a Tuition Installment Plan (TIP). Through a TIP program, the college may divide tuition into equal monthly payments with no interest added. If the parent or child can afford it, this avoids making one lump sum payment and avoids taking out the additional private loan to cover costs. However, look into whether the student’s specific college offers this option.

We have written previous blog postings on the dangers of co-signing a loan – which puts more than your name on the line.  If you have any questions on this topic, feel free to contact our firm.

There are ways to file for bankruptcy with student loan debt.  For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade Garcia McMaken has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade Garcia McMaken website at www.miamibankruptcy.com.

Related Resources: https://www.nbcnews.com/business/consumer/cosigning-loan-your-credit-score-will-drop-you-ll-retire-n739366

 

The Student Loan Crisis Facing Older Americans

January 13, 2017 Posted by kingcade

When we think of those struggling with student loan debt, we typically think of millenials still living with their parents.  However, many boomer parents are struggling, too.  According to a report from the federal Consumer Financial Protection Bureau (CFPB), older Americans are carrying an “unprecedented amount of student loan debt into retirement.”

In 2015, older consumers owed an estimated $66.7 billion in student loan debt.  Nearly 867,000 borrowers 65 and older owed federal student loans in 2015, now the fastest growing segment of student loan borrowers.

With these new findings, it seems the education debt crisis and retirement are closely tied.  A growing number of older borrowers are struggling to make their loan payments, oftentimes due to reduced incomes in retirement.

A growing number of federal student loan borrowers age 65+ had their Social Security benefits reduced or offset because of unpaid student loans – 8,700 in 2005 and 40,000 in 2015.   The vast majority of the older borrowers, approximately 73%, took out student loans to finance their children’s or grandchildren’s education.  Many of these loans were taken out under the Parent PLUS Loan Program, with a current interest rate of 6.31%, the only federal program that allows parents to borrow for the undergraduate education of their children.

Here are some tips for older borrowers struggling with student loan debt:

If you have co-signed your child or grandchild’s student loan, request the servicer send you an account statement so you can learn the outstanding balance and pay off the loan.

If you are struggling to make federal student loan payments, you may qualify for a payment plan that can substantially cut your costs.  For example, if you retire and your income drops substantially, you can apply for an income-based repayment plan.  This could reduce your payments and even suspend them.

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

New Jersey Student Loan Agency Instructs Staff Not to Tell Borrowers About Help Unless They Ask

August 2, 2016 Posted by kingcade

New Jersey has the largest state-based student loan program in the country. However, the terms of the loans offered through the program are particularly harsh and can lead to financial hardship.

Recently, internal emails from the staff at Higher Education Student Assistance Authority were released where employees were instructed not to tell families that they may qualify for loan forgiveness unless they ask.

The email sent to staff members in May 2016 from a supervisor said, “Families of deceased borrowers (or surviving cosigners) must inquire if HESAA has a policy on loan forgiveness. We should not be volunteering this information.”

The agency’s chief of staff, Marcia Karrow, released a statement that said the emails “do not accurately reflect the Authority’s policy or practice on loan forgiveness.” However, Karrow did not provide any proof that management had corrected the instructions that were sent out by email.

According to HESAA, they have helped 35 out of 50 cosigners or co-borrowers who have requested assistance after a borrower died or became disabled over the past four years.

The same company released a statement directly following Superstorm Sandy in 2012 stating that borrowers’ credit ratings would not be affected if they made a late payment. Instead, the agency only erased late payment reports if a borrower requested it.

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Co-signing a loan puts more than your name on the line

June 29, 2016 Posted by kingcade

Co-signing is an all too common practice, and gives you the opportunity to help another person.  However, this responsibility comes with great risk, and little reward.

For example, you might co-sign for a car you never drive, a house you never live in or even a student loan for someone else’s college education.  When you co-sign a loan, you essentially agree to repay the loan yourself.

A survey from CreditCards.com reveals the dangers of co-signing and why you SHOULD NOT do it.

  • 28 percent of co-signers saw a drop in their credit scores because the primary borrower paid late or not at all.
  • 38 percent of co-signers had to pay some or all of the loan payments because the primary person did not pay.
  • If your income is not high, you are more likely to be pulled into a co-signing nightmare. The survey found that 58 percent of co-signers who make less than $30,000 a year had to pay some or all of a credit card bill or loan they co-signed.
  • Most co-signing requests were for auto loans, followed by personal loans, student debt and then credit cards. About half of the people who co-signed were parents.

 

Here are some additional dangers of co-signing a loan.

  • You are not considered a backup borrower. You are equally responsible for the first payment to the last.
  • If the loan or credit card is not paid, the lender can start collection actions on you right away. Do not believe that lenders first go after the primary borrower and then the co-signer. Most likely, lenders will target “the person with the better potential to pay.”
  • If collection actions are pursued, you could end up paying late fees and even have your wages garnished.
  • Late payments and collection actions are reported on your credit report.
  • This may limit your ability to borrow because, as a co-signer, you are on the hook for the debt.
  • Even if the person you are co-signing for is responsible with money, you cannot predict what the future holds for his or her finances. What if the person becomes unemployed or unable to work?

As one consumer wrote, “I have told more than one relative that while I can guarantee their willingness to pay, I cannot guarantee their health or employment.”

Click here to read more on this story.

If you are in financial crisis and considering filing for bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

April 13, 2016: “Million Student March” for Debt Reduction Rally

April 12, 2016 Posted by kingcade

Students are literally “taking it to the streets” this week to further promote a wave of activism against crushing student loan debt.  The students represent a massive force promoting the idea that higher education should be an investment we make as a society and warns that the $1.3 trillion in student debt is not only burdening debtors, it’s having a serious effect on the nation’s economy.

Last November, the demonstrations took over 125 campuses, as the “Million Student March” stunned the news media with an impressive, nationwide show of force.

This Wednesday, April 13, the next round of protests will command the attention of Americans engrossed in the 2016 presidential election debate about the future of our country.

The demonstrations will have four demands:

  1. Tuition-free public college education;
  2. Cancellation of all student debt;
  3. $15 minimum wage for all campus workers;
  4. Divestment of university endowments from private prisons corporations.

However, many of the 41 million people struggling to pay their student loans are the not-so-young people-currently in the workforce or looking for work- who had to take out loans to get their education and are now struggling to make their monthly loan payments while supporting their families.

Many are middle-aged parents who are struggling to pay their children’s college loans because they co-signed the loans.  There are 706,000 people on Social Security still paying off student loan debt, with 191,000 having their retirement benefits garnished to pay their student loans, according to GAO reports.

Click here to read more on this story.

For borrowers who are struggling with student loan debt, relief options are available. Many student loan borrowers are unaware that they have rights and repayment options available to them, such as postponement of loan payments, reduction of payments or even a complete discharge of the debt. It is important you contact an experienced Miami bankruptcy attorney who can advise you of all your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.