Is It Ever Wise To Co-Sign A Loan?

[bonnie]

U.S.

California couple struggling after being forced to pay deceased daughter’s student loans

Published August 06, 2014FoxNews.comFacebook652 Twitter298 livefyre2143

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A California couple is speaking out after they say their finances have been devastated over their daughter’s student loan debt, which they are being forced to repay after the woman died unexpectedly four years ago.

Steve and Darnelle Mason’s 27-year-old daughter Lisa died suddenly from a liver disease, leaving behind three children. Darnelle Mason, who is now raising her grandchildren along with her husband, told Fox Business the “excruciating” pain of losing her daughter has only been compounded by the crushing debt.

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“She was doing what she really loved to do,” Mason said. “So it is really just a crushing burden.”

Lisa Mason had taken out close to $100,000 in student loans in order to pay for nursing school, and was making payments on the debt when she died. Steve Mason said he and his wife, who had co-signed the loans, were contacted immediately after his daughter’s death and were told they must start making payments.

“We knew if she didn’t pay her debt we would be responsible by co-signing, but we didn’t know that if she died the debt would fall to us,” he said.

Mason said his daughter’s debt has ballooned to $200,000 and the payments exceed $2,000 a month.

Mason, who is a minister, said some of the lenders have given them breaks, such as lowering their interest rate, and one loan was forgiven. However, he said the debt has still been “financially devastating” and wrecked their once-solid credit.

Mason said he believes private student loans should be regulated the same as federal student loans, and should be able to be forgiven if the borrower dies. He also said he believes student loans should be able to be discharged in bankruptcy, like other types of debt.

“There needs to be some relief,” he said.

[rudywoofs (Pam)]

$100,000 for nursing school is an outrageous amount if you've got to borrow most of it...

But it's a shame the parents are now stuck with paying it off.

(If her father had been an SDA minister, she'd have gotten a tuition break at an Adventist nursing schools.)

[bonnie]

$100,000 for nursing school is an outrageous amount if you've got to borrow most of it...

But it's a shame the parents are now stuck with paying it off.

(If her father had been an SDA minister, she'd have gotten a tuition break at an Adventist nursing schools.)

You have to feel for the parents but don't people read the fine print before they sign something.

[JoeMo]

My daughter-in-law wanted me to cosign a rather small ($3k) loan for her. I told her I would rather lend her the money myself than chance her defaulting and messing up my good credit. Obviously, her credit isn't that good if she needed a co-signer for $3,000.

[pierrepaul]

While people like to make fun of insurance salesmen, life insurance can be a wonderful thing. Where one party has guaranteed the loan of another, or there are two co-debtors, it is common business practice to contract a life insurance policy on the lives of the debtors in an amount sufficient to cover the debt. This is especially important when there is no asset guaranteeing the loan. If one takes a loan for a house, the house is mortgaged as security. One also contracts a general insurance policy for the house so that if the house is destroyed and one loses the asset, the policy will cover the loan (at least). When the "asset" one acquires through a student loan is a future income stream, it is a risky loan if that income stream never comes to fruition. Life insurance and disability insurance are products that should be considered.

In Canada it is common practice for the lending institution to propose life insurance and in most loan documents, if the borrower refused insurance they usually have a specific disclaimer to be signed by the borrower/guarantor stating that they were offered insurance and refused it. But no one plans on dying in their 20s, so many refuse the coverage.

[Jeannieb43]

In Canada it is common practice for the lending institution to propose life insurance and in most loan documents, if the borrower refused insurance they usually have a specific disclaimer to be signed by the borrower/guarantor stating that they were offered insurance and refused it. But no one plans on dying in their 20s, so many refuse the coverage.

But those insurance benefits are only payable to the creditor, not to the borrower's family. So it doesn't help anyone, really, except to repay a debt which [possibly] might have actually been discharged on the borrower's death.

[bonnie]

But those insurance benefits are only payable to the creditor, not to the borrower's family. So it doesn't help anyone, really, except to repay a debt which [possibly] might have actually been discharged on the borrower's death.

If the borrower needs a co-signer the co-signer is on the hook,especially on student loans.

We purchased a home from an Uncle and we carried disability or death coverage so in the event something happened he wouldn't end up getting the house back which he didn't want.

Had the parents in this story carried insurance on this very large loan they wouldn't be in the fix they are now.

Generally this type of insurance isn't all that expensive

[joeb]

Originally Posted By: pierrepaul

In Canada it is common practice for the lending institution to propose life insurance and in most loan documents, if the borrower refused insurance they usually have a specific disclaimer to be signed by the borrower/guarantor stating that they were offered insurance and refused it. But no one plans on dying in their 20s, so many refuse the coverage.

But those insurance benefits are only payable to the creditor, not to the borrower's family. So it doesn't help anyone, really, except to repay a debt which [possibly] might have actually been discharged on the borrower's death.

But that is exactly what is needed. If the daughter had bought that type of insurance her parents would not be in a huge financial hole now.

[Gerr]

$100k for nursing school? Incredible!

I can understand the parents doing it for their daughter, but.....as a general rule:

NIV84 | ‎Pr 6:1 My son, if you have put up security for your neighbor, if you have struck hands in pledge for another, ‎2 if you have been trapped by what you said, ensnared by the words of your mouth, ‎3 then do this, my son, to free yourself, since you have fallen into your neighbor’s hands: Go and humble yourself; press your plea with your neighbor! ‎4 Allow no sleep to your eyes, no slumber to your eyelids. ‎5 Free yourself, like a gazelle from the hand of the hunter, like a bird from the snare of the fowler.

[Tom Wetmore]

All the could of, would of, should of laments don't do anything to help these people or fix what is the root causes of the problem. Problem number one in the is country is the cost of higher education. The rising costs have significantly outpaced inflation and wage and income growth for decades. It has become increasingly out of reach for most middle class families without substantial borrowing. And even the assistance that may be available for lower income families is not sufficient. Many of us who are older and now putting our own children and grandchildren through school, recall being able to earn enough ourselves as students to cover much, if not all of our educational costs. But the harsh reality now is that what most students can earn working full time will not cover the costs of higher education.

Problem number two is the laws regarding student loans. Those laws used to be designed to benefit and help a student get an affordable education. The Federal contribution to the program has been substantial reduced. The changes that Congress made have served only to benefit the financial institutions. That such loans are now impossible to discharge in bankruptcy even on a showing of circumstances as described in the above story beg for a change. Reform is needed, it we know how likely that is these days.

[bonnie]

All the could of, would of, should of laments don't do anything to help these people or fix what is the root causes of the problem. Problem number one in the is country is the cost of higher education. The rising costs have significantly outpaced inflation and wage and income growth for decades. It has become increasingly out of reach for most middle class families without substantial borrowing. And even the assistance that may be available for lower income families is not sufficient. Many of us who are older and now putting our own children and grandchildren through school, recall being able to earn enough ourselves as students to cover much, if not all of our educational costs. But the harsh reality now is that what most students can earn working full time will not cover the costs of higher education.

Problem number two is the laws regarding student loans. Those laws used to be designed to benefit and help a student get an affordable education. The Federal contribution to the program has been substantial reduced. The changes that Congress made have served only to benefit the financial institutions. That such loans are now impossible to discharge in bankruptcy even on a showing of circumstances as described in the above story beg for a change. Reform is needed, it we know how likely that is these days.

Always someone else's fault and responsibility. A co-signer promises to repay if the borrower can't.What is there about that that these people didn't understand?

The lending institution wanted more credit worthiness than this woman could provide.

The rest of the taxpayers should be on the hook. It has to be a tough situation for them but many "tough" situations are brought on by the people involved.

Everytime someone says "reform is needed" it ends up costing more when it involves the federal government.

One of the main factors in the rise of higher education is the government student loan program.

"When you subsidize something, it’s cheaper for people to consume. So people consume more of it and demand rises,” A rise in demand will mean a rise in costs".

[rudywoofs (Pam)]

Expensive universities do offer excellent education, but the fact is, the woman did not *need* to get $100K in loans for nursing school... there are plenty of good programs at community colleges to allow someone to get their RN license. If they want to continue on for their baccalaureate and masters degrees, they can go part time while they work.

There's just absolutely no reason for someone to have that much in a student loan (not to mention, pretty self-serving to ask your parents to co-sign it)

And just as an aside, there are LOTS of places to apply for scholarships that don't need to be paid back. One just needs to do due diligence..

[joeb]

Expensive universities do offer excellent education, but the fact is, the woman did not *need* to get $100K in loans for nursing school... there are plenty of good programs at community colleges to allow someone to get their RN license. If they want to continue on for their baccalaureate and masters degrees, they can go part time while they work.

There's just absolutely no reason for someone to have that much in a student loan (not to mention, pretty self-serving to ask your parents to co-sign it)

And just as an aside, there are LOTS of places to apply for scholarships that don't need to be paid back. One just needs to do due diligence..

Hear, Hear!! You hit the nail on the head, rudywoofs.

[Tom Wetmore]

All undoubtedly true. But it still does not address to real problem that higher education is getting priced out of reach of the average middle class person leaving them with far fewer alternatives of lesser quality and requiring difficult choices and compromise. Nursing may be one of those professions where more scholarship money is available because of the shortage of nurses in many areas. But that is not as likely for other majors. Also if those scholarships are need based, many middle class families may not qualify. Very few scholarships cover the full expense or even a significant portion. Many student have to finance their education by a combination of loans scholarships and earnings.

Then there are those that go for professional degrees that end in debt twice as deep as this woman. Assume same scenario and realize the same impact, only worse.

One thing that seems to be overlooked is that it is assumed that the consigning for a student loan, or any loan for someone with low or no income, under aged. To even qualify to get the loan requires someone with income or an adult or both to cosign.

[Guest]

this is a great topic and it really shows how we can get caught.

myself i hate anysort of debt or owing things to others - this is easier said than done (eg. loan for a house) especially in this day and age.

the point being that we love our children and want the best for them, set them up with a good job, so it would be very hard not to co-sign a loan - especially when you don't understand what it truely entails and/or the risks.

thankyou OP for bringing this to our attention, i am sure others will greatly benefit from what is written here.

[rudywoofs (Pam)]

One thing that seems to be overlooked is that it is assumed that the consigning for a student loan, or any loan for someone with low or no income, under aged. To even qualify to get the loan requires someone with income or an adult or both to cosign.

you're right, Tom! I'd forgotten that my folks had to co-sign on my student loan from YEARS ago!!! Unfortunately, there weren't a lot of scholarships available back then (at least none that I could find).

[Gregory Matthews]

Yes, it is wise to co-sign a loan when you are ready and willing to pay the bill.

[Naomi]