BEWARE OF CO-SIGNING OF STUDENT LOAN
A California couple recently reported to Fox News that they are now solely responsible for their deceased daughter’s student loans in excess of $200,000.00. Steve and Darnelle Mason never expected to be responsible for their daughter’s student loans. They were simply facilitating the young mother of three’s efforts to obtain an education to provide for herself and her children. They did not know that they would be responsible for the entire amount of the debt, even if their daughter suddenly passed away, which is exactly what happened. Now, the Masons are not only taking care of the three children, but are also responsible for the student loan amount debt that likely cannot be discharged in bankruptcy.
This troubling scenario is illustrative of a growing problem. Student loan debt now exceeds, by far, the total amount of consumer debt in the United States, and is well in excess of $1 trillion. That sum is staggering, and the effects are long lasting. It is exceedingly difficult to obtain a discharge of student loan debts in a bankruptcy proceeding, and therefore, lenders do not exercise the same amount of caution for that type of loan as they would, for instance, in issuing a start up business loan backed by the Small Business Administration. It is certainly more difficult to obtain than a mortgage, and a mortgage at least has collateral.
As it appears, no relief is in sight. Congress has periodically debated options for those in impossible debt circumstances, but no effective relief has been forthcoming. This is a mounting burden that the United States will eventually need to face head on. For now, families like the Masons suffer under crushing amounts of debt.
One lesson here is, be very cautious before co-signing a student loan. Indeed, I recommend to my clients that they not co-sign with anyone on any type of loan, unless they have complete control over the repayment. That usually does not happen with student loans. It is tragic that a young mother in this case suddenly passed away from a disease that normally should not be taking a young mother. But the fact is, many people are in this same circumstance, and they are there only because they wanted to help. Over my decades of practice, I have seen many people who have suffered drastic consequences due to their kindly gesture of co-signing loans. My best advice: Don’t do it!