College Loans ~ in both kids & parents names

[mafibisha]

This has probably been asked and answered but a search here hasn't brought up any answers.

Some of our friends' kids have their loans for college in their own names without their parents as co-signers, and some of our friends have taken out loans for their kids' colleges and their kids names aren't even on the loan. (OH how I wish we could do that for them) And some have both their names and their kids' names. None of our close friends have kids that have graduated yet, although my bro's kids are close.

When you get loans for kids' college in both their name AND yours (the parents) when and how do you have your names removed after they graduate, with just the graduate being responsible for the loan? Obviously when they have a job and way to pay back the loan LOL But hopefully, and assuming they DO get a job and can pay back the loan, is it a huge process or ordeal to have your name removed? Or do you just leave your names on there, even if your child is paying it back anyway? Any advice when you'd have yours removed, or things to avoid or watch out for? Hope that made sense! LOL

TIA!

 

[summermac]

In my experience with parent loans (which is nominal b/c my parents didn't do that) they are more like a consumer loan and you take out the amount and start paying on it immediately so much a month. Student loans do not require payment until after graduation. I did not realize there was an option to transfer any loan amount due back t the student for a parent loan.

 

[JamesMom]

I don't believe you can remove names from the loan. Co-signers are liable for the amount due in the event the primary doesn't pay for the life of the loan. You can work out an unofficial arrangment, but if the kid defaults-it's on you.

ETA: guess you learn something new everyday. Wells Fargo said this on their website:
Can a co-signer be released from a Wells Fargo student loan?
Yes, in some cases a co-signer can be released from student loan responsibility. The student borrower can request that his or her co-signer be released once the student has made all of the first 24 consecutive monthly payments on time and meets certain credit requirements. In addition, a co-signer can be released in the event of the student beneficiary's death or a total and permanent disability. Please note: this forgiveness is not available to co-signers of the Wells Fargo Private ConsolidationSM Loan. Contact us for more details.
https://www.wellsfargo.com/student/cosign/


The above applies to private Wells Fargo loans. However, I don't believe such a provision exists for Federal student loans.

 

[mommyrosa2]

We are going thru this now as my oldest DD will be going to college in the Fall. As we started looking at different loan options, we decided that we would not be co-signers on any loans. Of all the options we looked into, once our names were on, we were equally responsible for that loan and that is not something we want to do at this point in our lives. We also consulted with our Accountant/Financial Advisor and he too suggested (for various different reasons) that we not co-sign any loan for her so we are going to instead give her "X" amount of money towards her tuition and the rest she will have to borrow by taking out student loans and working part-time. Luckily between what we give her and what she's earned and continues to earn, she'll graduate in 4 years with a loan that she should be able to pay back in a reasonably short amount of time.

 

[lyncecelia]

my parents took out a Parent PLUS loan for me, and there was no way to transfer the debt to myself. I think it's more stressful that way, because it doesn't matter if I'M unemployed, it's in my mom's name, so I still have to pay it off. I also can't consolidate the debt with my other student loans since it's under my mom's name. We've tried to get it put in my name by saying my mom was "unable to pay" but to no avail...chances are, your name is going to be on it for the life of the loan and you will be responsible to make sure it's paid off.

 

[mossy1]

My only experience has been with the Plus loans and they are in my name. I don't believe there is an easy way to switch the responsibility. I just make the payments. Although you can get them differed so that makes the payment optional for months when you may not want to make a payment. I believe the rules can/will differ between public or private loans. Best to check with your lender.

 

[iheartpeterpan]

There are several different types of student loans available.

Stafford Loans - There are 2 types of Stafford Loans:

Federal Family Education Loan Program (referred to as the FFELP) goes through a private lender and are guaranteed against default by the federal government.

Federal Direct Student Loan Program (FDSLP) loans or "Direct Loans", administered by the school and provided by the US government directly to students and/or their parents.

Stafford Loans are either:
Subsidized: Requires the FAFSA and is need-based. You must exhibit a financial need to qualify for this loan (although not as much need as required by the Pell Grant or other direct aid). The Govt pays your interest while you are in school. About 2/3 of subsidized Stafford loans are awarded to students with family AGI of under $50,000.

Unsubsidized: You pay all interest, although you can defer payment while you are in school but your deferred interest will be tacked onto (capitalized in) the loan.

Payments on all Stafford loans begin 6 months after graduation and have a term of 10 years.

Perkins Loans - you have to have great financial need to qualify. The school is the lender. Interest is paid by the government while you are in school and for 9 months after you leave school or graduate. Interest rate is set at 5% by statute and the repayment is for 10 years. This loan will be in the student's name.

PLUS Loans - if you don't qualify for either of these, there are a variety of PLUS loans available where the parents can borrow for the students education. These will be in the parent name. (Or if the student is a grad or professional student they can take out a PLUS loan in their own name).

All of the federal debt can be consolidated at graduation, but you can't consolidate federal and private debt.

 

[mafibisha]

OP here, thanks all. Very helpful.

A neighbor just mentioned there's a new federal program Pres. Obama is trying to start that will help with student loans. Anyone know anything about it?

 

[FINFAN]

we did a parent plus, and had a seperate contract drawn up with our DD's agreement to make the payments. May sound harsh to some, but it was our DD's idea, she wanted to legally have the responsibility. Also, not to be morbid, but if either borrower (parent) or student die, a parent plus loan may be released..unlike student loans. So if I kick the bucket, she will at least have a chance on that loan to be forgiven. The interest rate is also locked in. None of the payment options are pleasant IMHO, but you do what you can.

 

[NYCDiane]

You can't get your name removed. You're a CO-SIGNER because your child doesn't have enough of a credit history established to get the loan on their own. The bank/lender wouldn't have given the loan any other way. You are just as responsible for the loan as your child. If your child decides not to pay, you are responsible to pay. It will affect your credit report just as it will affect your child's credit report.

My advice would be to have the kid work and pay as much as he/she can and take out loans in their own name for the remainder so you won't be left holding the bag if they default.

 

[libraryfreak]

A student can only borrow $4500 per year for college in their freshman and sophomore years (The amt goes up slightly when they're a junior and senior), unless the parent income is very low, then they can borrow up to $6500. I don't see how a kid can go to away to college w/o parental help.

 

[iheartpeterpan]

A student can only borrow $4500 per year for college in their freshman and sophomore years (The amt goes up slightly when they're a junior and senior), unless the parent income is very low, then they can borrow up to $6500. I don't see how a kid can go to away to college w/o parental help.

This is actually only true of subsidized Stafford loans, you can combine with other types of unsubsidized loans. Also if you are an independent student (according to the rules, there are several tests like are you married, or do you serve in the military, or have a kid you support, or older student etc.) you can borrow more.

 

[seashoreCM]

My suggestion is to never add your name to a loan at a later date, with the exception of "assuming" a mortgage loan to buy real estate.

You can always pay the person who took out the loan if you feel a moral obligation to cover it, and that person makes the loan payments.

If your name is on a loan, whether from the start or you succeeded in adding your name, then it is solely up to the bank or other loan holder to let you off.