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Retirement Suicide: Grandparents Who Co-Signed for Student Loans

Written by Gary North on August 8, 2012

Grandparents are in the hole for $36 billion for student loans. Some of these debts are because of their grandchildren. They co-signed the loans. Then the grandkids defaulted.

The grandchildren could have gotten their B.A. degrees for under $15,000 by avoiding the standard approaches to college. They could have funded all of it themselves by working part-time. But they went to their grandparents to fund their years of party time. The grandparents signed on. Now they are trapped.

I cannot imagine anything more risky than this in your retirement years. Grandparents are encouraging students to take on debts that are completely unnecessary. After graduation, if the grandkids want out, they can just stop paying. The lenders will then present the bill to grandparents.

There is then no escape.

In the misguided belief that they are doing their grandchildren a favor, they are luring them into the worst financial decision of their lives. Then the kids pass on the burden to the grandparents. It’s a lose-lose situation. Bit not for the lenders.

The Bible repeatedly warns against co-signing a note, which in the King James English is called “surety.” If your grandchild ever makes this request, show him the alternatives.

This news is from the New York Federal Reserve Bank.

They found that Americans 60 and older still owe approximately $36 billion in student loans. In the third quarter of last year, the Fed found that Americans owed $870 billion in student loans and borrowers age 60 and above accounted for 5% of that overall figure, while those fifty and above accounted for 17%.

One expert in college financing has told the truth. The old strategy is no longer working.

Well, I think a lot of it is going to come down to changing our perspectives about what is an acceptable burden of debt to take on for a college education. That clear connect between getting that degree and then getting a good, solid job that leads to a prosperous career just isn’t there anymore. The recession has just blown that up, as has the escalating cost of college.

The value that we’ve all assumed came with a college degree simply isn’t there.

The news is slowly getting out, but it will take a complete re-thinking of college costs and benefits to change the minds of guilt-ridden parents. Grandparents must re-think this, too.

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11 thoughts on “Retirement Suicide: Grandparents Who Co-Signed for Student Loans

  1. dick Grace says:

    Student loans are a sop to the education establishment. Their spending is as ridiculous as that of the government. There is no end to their needs, they are the horse leaches of Proverbs 30:15 that are never satisfied. There are never enough buildings, salaries, etc. to satisfy their lust. Instead of requiring the education system to be frugal with the peoples money congress has given them the deceptive gift of student loans which eliminates the need for restraint and puts the borrowers in debt forever with no benefit to the student. We as a country are over extended on every front and the judgment is upon us.

  2. This problem can also be partially blamed on corporate america. Businesses requireing a BA degree to perform jobs that in the past only rquired an Associates degree. I beleive the colleges are in cahutes with businesses. They worked togethger to come up with this scam of how important a higher education is needed. I could not get a job in Accounting with an AAS degree, went back to school took on $29,000.00 in student loan debt. I got an accounting job, and have not once utilized any knowledge that i didn't already have before I got my BS degree. I could have done everything I am doing now without it. Its all a scam by business and colleges to get more revenue.

  3. Don't overlook the fact that a significant percentage of the money from student loans flow through the system and get used in various places to pay various taxes and fees to various governments: Local, state and federal. Since much of the money is used to pay wages and salaries, that includes payments of income taxes and payroll taxes as well as payments of some parts of all of the other taxes and fees that are a part of employees' personal and household cost of living. Keynes vaunted multiplier is, for the greatest part, either imaginary or it is the multiplication of the amounts of money that is being "laundered" through the system on its way to being paid to various governments. Borrowed money looks just like earned money by the time it gets used for the second financial transaction and then it looks the same for all subsequent transactions.

  4. "The rich ruleth over the poor, and the borrower is servant to the lender." (Proverbs 22:7)

    In cowboy terms: “Debt doubles the weight on your horse and puts another in control of the reins.” All debt enslaves, but when usury is involved, the weight of slavery is compounded many times over:

    …Woe to him that increaseth that which is not his! How long? And to him that ladeth himself with thick clay! Shall they not rise up suddenly that shall bite thee, and awake that shall vex thee, and thou shalt be for booties [plunder, NASV] unto them? (Habakkuk 2:6-7)

    The ancient Babylonians used thick clay tablets to engrave their usurious loan contracts. Borrowers were literally laden with weight. Today, the weight is worse because most people are so laden with usury their entire lives that upon their deaths many pass on outstanding debts to their children and grandchildren.

    Verse 7 warns that usurers rise up and bite. The word “bite” is translated from the verb form of neshek, which means “interest on debt.” Debt is bad enough, but interest-encumbered debt will rise up and devour you. At the least, it will take a bite out of your bank account and, ultimately, your children’s inheritance.

    Usury diverts a nation’s wealth to the ungodly. The professional usurer plays no productive part in a nation’s economy. Instead, he hampers the productivity of others for his own gain, while producing nothing of value himself. True producers earn by the sweat of their brow; usurers earn by someone else’s sweat.

  5. For more, see the online book "Thou shalt not steal" at http://www.missiontoisrael.org/8thcom-pt1.php.

  6. My daughter is about to graduate with an Associates degree as a legal secretary.. She did not get a loan to pay for it. She got grants and scholarships to finance it. She did this while working part time as a waitress and taking care of three young sons and a husband.

  7. Cliffystones says:

    Like you, I've also found that extra "BS" to stand for bull s#!t! And I do technical repair work. While I did benefit in a generalized way, the biggest thing I learned when attaining my BS was just what a waste of time it was.

  8. Eleanor Maus says:

    Your daughter is an American Shero! Be proud of her.

  9. 4 year apprenticeships to establish ones self as a journeyman with block release for the equivalent of an associates degree…the only problem is that the unions have that road all to themselves and their offspring. Locked up tight. Just try to see if you can break into that fraternity….good luck.

  10. meangene says:

    Join the union so you can work with hundreds of illegal aliens.

  11. As I said….trying is easier than being accepted. Been there done that.