We all want the young people we love to have the best opportunities in life, which is why many parents and grandparents agree to co-sign for private student loans and federal PLUS loans. However, things don't always go as planned, and if the student ends up defaulting on the loans, lenders can come after parent- and grandparent-co-signers next.
Because these loans are often for tens of thousands of dollars, it can cause a serious financial crisis for individuals who might be nearing retirement age. As a recent article from Forbes pointed out, even Social Security payments can be garnished by lenders pursuing student loan debts. Making matters worse is the fact that student loan debt usually is not forgivable in personal bankruptcy.
How to prevent this from happening to you
The Forbes article said that according to executive director of The Student Debt Crisis, there are ways that parents and grandparents can still help the young people they love achieve their higher education goals without risking serious debt. They include:
- Provide your loved one with financial support, but not by co-signing for a loan.
- If you decide to co-sign, opt for a subsidized federal loan over a PLUS loan or any kind of private loan.
- Encourage your student to avoid for-profit colleges and to only take out what he or she needs.
If you are already facing significant student loan debt
While you can't turn back the hands of time, you can work with an experienced bankruptcy lawyer to come up with a plan for regaining control of your finances. The solution may involve bankruptcy, a bankruptcy alternative, or a solution as simple as an income-based or income-contingent repayment and consolidation plan.
Although numerous advocacy groups are pushing Congress to put a stop to college lenders garnishing Social Security payments, there is no way of knowing if or when lawmakers will do something about the problem. That's why it's important to take matters into your own hands and find out what you can do to make sure that your retirement is safe.