More Than Half of Parents Who Cosigned Student Loans Struggle Financially
Parents unrelated to student loans with their daughter after graduation.
Students aren’t the only ones suffering from student loan debt. Parents who cosigned on private loans are feeling the pain by taking hits to their credit scores while simultaneously losing the credibility to qualify for other loans and financial services. Despite the heat that student borrowers take, parents may share a fair part of the blame.
According to new research from LendEDU, 56.8 percent of parents who cosigned a private student loan for their college-bound kid have seen their credit scores decline. 34.4 percent of parents claimed that cosigning their child’s loan prevented them from taking out new loans for auto purchases, the purchases of homes, or debt consolidation. Today, most of the student loan attention revolves around the negatives for young student and graduate debtors, but their cosigners, often their parents, also struggle as a result of the student loan crisis.
The pain that cosigning parents are feeling may stem directly from the cost of higher education. In many cases, federal student loans simply aren’t enough to cover tuition and the overall cost of attendance; in fact, LendEDU found that around 90 percent of all private educational loans are cosigned. Additionally, parents are typically the cosigners on these loans. (some parents may be able to relieve themselves of cosigner responsibilities by getting their kid to refinance student loans)
Private student loans are notorious for barring the possibility of discharge in bankruptcy, and student loan forgiveness for private loans is more of a pipe dream than it is for federal loans. With that being said, the cosigner is often completely on the hook for missed and late payments. Furthermore, the data from LendEDU suggests a comparable lack of knowledge and negligence from cosigners and parents.
According to the survey, nearly a third of cosigners didn’t fully understand the risk to their own credit score; additionally, 35 percent said that they regretted cosigning the loan. Of the survey respondents, 65.8 percent said that they have helped their children make student loan payments. 35.8 percent of cosigners said their children have missed a payment, negatively impacting their own credit score. What’s more, 59.4 percent of cosigners said that their children have not considered refinancing their student debt which would release their parents from cosigner obligations.
While it’s too late for many parents who are already on the hook, future borrowers can refrain from taking on considerable student debt by avoiding schools that are notorious for high student debt. According to a recent survey by the Student Loan Report, the top five schools in the nation that stick parents with the most student debt include Bradley University which left parents with an average debt of $17,419 in 2015; University of the Pacific which results in parent debt of $13,764; Drake University which leaves parents with $13,561 in debt; Campbell University which has parent debt of $12,182, and Mount Saint Mary College which has average student debt of $12,180. In general, avoiding high tuition schools is a good idea, especially since the rise in tuition nationwide is often blamed for the current student loan crisis.
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