My husband and I co-signed 3 Sallie Mae loans for our son. He is working however, he doesn't make enough to cover the loan payments. In essense, he is defaulting on the loans that we co-signed (he plans to make payments on the loan that he is solely responsible for). We can't afford the payments on those loans either! What are my options? He's going to ruin my credit unless I make the payments. I have another son who will be wanting to go to college in a year. I'm concerned about not being able to help him if I'm saddled with the payments and continue to be on the hook for the loans that I co-signed.
These are tough situations to deal with, and I feel bad that you will not like what I am about to tell you. Your best option is to speak with the loan holder, and try to work out a payment plan you can live with. The debt will not go away, and since you co-signed, it will show up on your credit reports. You should try to offer options of interest only payments, or extended terms of time, etc. Usually you can get an extension on repaying a student loan if you request one. There are options available, but they all mean repaying the loan somehow. Again, deal with the loan holder directly, be honest about the situation, and work out the best plan you can. Include the condition of no negative reporting on your credit reports as long as you adhere to your payment plan. As a note, find out if there is any reporting yet, unfortunately student loans sometimes do not notify the co-signer of issues and late payments/arrears.
It is possible to go to college without becoming saddled with large student loans. In fact, from a return on investment point of view, it can be hard to justify starting out in life with huge debts before you start to build income to pay it off, as the cost of that debt compounds. Because the cost of debt compounds, given a choice, minimizing costs up front may allow increased costs later. In addition, not all degrees produce the same return, and some (maybe most) degrees, may not justify taking on large loads of debt comparable to house down payments. The ease with which we saddle our kids, and families, with large debts for college costs is part of the reason for run-away college costs in the first place, for the same reason that easy but potentially expensive loans have messed up the sub-prime mortgage market, and then impacted the housing market. Cost, risk, and return MUST always be considered in any major investment, and when large numbers of people stop doing that, we are setting ourselves up for a bubble. The most expensive or most prestigious colleges may not be the best choices, both from a cost point of view, and from a quality of teaching point of view, particularly in the first few years of a college education, and particularly if your son intends to also go on to graduate school. It is where you get to that matters, and what it allows you to do, not how you got there. What does it cost to attend college locally in your area, initially thru junior colleges with transferable credits, transferring to state colleges to finish up a four year degree? How is your debt and available cash flow considered in any student aid calculation? What would your second son need to do to be considered as an independent adult for purposes of scholarship aid?
Sallie Mae has an income sensitive repayment plan that you can utilize for as long as 12 months and then the situation can be revisited. I think it's percentage based and starts at 2-4% of your income.
Just a suggestion to anyone having kids thinking about going to college. Please think twice about taking on the extra burden of student loans for both you and your children, have you considered what they will be contributing to the cost while going to school, are they going to work at least part time and go to school and what about working for large companies who offer college tution reimbursement. Our daughter worked (full time) all thru college and went to school full time and made the deans list and is now going for her masters all thru tution reimbursement. All we've had to do is pay for her books for the most part and offer encouragement when needed, she's very committed to doing her part because it's her future and she will reap the rewards.
