Many residents of Tennessee are struggling with college debt and the debt management issues that result – but they are not alone. More and more, students’ parents and grandparents are also feeling the strain of student loan debt, often having to seek debt relief for themselves for their part of the $1 trillion in student debt now owed across the country.
Students in Memphis and around the country often take out student loans to help pay for college. Sometimes, students lack the means for securing sufficient student loans and turn to their parents or grandparents to co-sign the loans for them. While this provides students with the loans they need to go to college, students and parents are often unaware of the consequences this arrangement might have in the future.
If, at any time, the student becomes unable to pay for their student loans and defaults on the loans, the co-signer for the loan is liable for any outstanding debt and any past due payments. So, when the student has to quit school, is unable to find a job after graduation or loses their job, the parent or grandparent must begin paying for the loan.
This can be difficult for the parent and grandparent. The parent might have debts of their own or might be struggling to raise enough income to support themselves and their child’s debts. It can be exceptionally hard for grandparents who may have already retired and therefore may not have access to a steady source of income.
Parents and grandparents who find themselves in these situations are often unsure of where to turn in order to pay off these student loans. Often they consider bankruptcy as a way out, but need to understand what can be discharged during the process. Student loan debts are generally not dischargeable in bankruptcy proceedings, even with respect to those who co-signed for them. However, filing bankruptcy can eliminate other debt and free up income to direct towards those debts that may remain.
One solution is to attempt to avoid the problem all together and be mindful of the implications co-signing a loan has. With some forethought, students and their parents can create a successful debt management plan to pay off student loan debt without a hassle.
Source: Forbes, “This Week in Credit Card News – Student Loan Perils, Hurricane Relief & Rising Household Debt,” Bill Hardekopf, Nov. 5, 2012