Here at ReadyForZero, we’re all about taking a holistic view of your finances. While we want to focus on helping you get out of debt, there are many ways that you can optimize your finances to both get out of debt and build wealth. One of the most important aspects of this is to educate yourself – which is why we cover so many topics on our blog and our resource centers.
But now we’re going to take a step further to make sure that we address everything you need to know in order to optimize for the best financial future possible. How are we going to do this? With the help of our good friend, Steve Rhode! Steve is a well-known debt expert who answers questions on his own website and is now offering help specifically to ReadyForZero users. Read on for today’s topic and answer from Steve!
Today’s question is from someone who co-signed on student loans for their child who has since dropped out of college and isn’t able to help with the student loan repayment. This person is nearing retirement, is having a hard time meeting these bills, and wants to know if it’s safe to go with a school loan consolidation company found on the internet. The company charges a fee of $700 to get payments reduced through the IBR program. Question: What can a parent who has co-signed on their child’s student loans do to make repayment more manageable?
Steve’s Answer on Options for Student Loan Co-Signers
The student loan co-signing issue is a huge one. Many co-signed for friends or family and thought they were doing a loving thing. The reality is when you co-sign you are on the hook for all the liability of repaying the entire loan and receive none of the benefits. The saddest cases I’ve seen are when the grandchild defaults on the federal student loans that the grandparents co-signed for and the grandparents get their social security checks garnished.
More companies are popping up and charging fees for student loan help. In my eyes, many are total scams. Here is what you need to know. If it is a private student loan the only programs available will be whatever the private student loan company offers. Call them. If it is a government student loan see Student Loan Consolidation Opportunities and the Best Way to Lower Your Student Loan Payments.
I called the Department of Education and they confirmed what I feared, that the co-signer is not eligible for the IBR since they only guarantee the loan and the IBR program is based on the borrower’s financial situation. However, there is no reason the student could not apply for the Income-Based Repayment Program or Income-Contingent Repayment Plan and get a monthly payment as low as $0 based on their minimum wage income.
When in doubt, you should call your student loan servicer and discuss all eligible repayment plans with them directly based on your specific situation. The Department of Education will direct you back to the student loan servicing company anyway.
The opinions stated in these posts are solely the opinions of Steve Rhode, not of ReadyForZero. Are you interested in asking your own question for Steve? Send me an email directly at firstname.lastname@example.org and use the subject line, “My Money Question”. If you’re more into social media than email, write your question on our Facebook wall or send us a tweet - don’t forget to include the hashtag, #mymoneyquestion!
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