Should You Help Your Grandkids With Student Debt?Aug 15, 2018
When you see your grandchildren struggling with post-secondary debt, it’s tempting to want to help shoulder some of that financial burden. The price of higher education just seems to keep going up. Even with the best of intentions though, your financial assistance shouldn’t come at the expense of your own efforts to reduce debt or achieve savings goals.
In this podcast episode, our Licensed Insolvency Trustees (LITs) from around Canada dive into the topic of grandparents supporting their adult kids and grandkids. Can grandparents be supportive without risking their own financial future? Our LITs provide resources, tips and advice on:
- What a grandparent should consider before offering financial help to grown kids and grandkids.
- No-cost ways to help your adult children during back-to-school season that can be just as valuable as providing money.
- What a grandparent should consider before co-signing a grandchild’s student loan.
Think twice before offering to be a co-signer
At first glance, the idea of co-signing for your grandchild’s student loan may might seem like a good one. For grandparents who cannot offer money, it’s a way to help without providing financial assistance. However, being a co-signer is not without significant risk to your personal finances and credit rating.
When students apply for a private student loan, the often need a co-signer. It’s important for any co-signer to understand that private loans have different requirements and rules versus government student loans, like…
- Interest begins to accrue immediately
- Monthly payments begin right away
- Repayment assistance options are far more limited compared to government student loans
How would being a co-signer affect your own financial situation?
- It could impact your own ability to borrow money should you need to, as it counts towards your overall debt load.
- If your grandchild misses payments or defaults on the loan, you will be responsible for repaying the loan.
- Your credit rating and credit score can be negatively impacted by late or missed loan payments.
- Any of the above could put your own financial stability at risk during retirement.
The good news is there are so many ways you can be supportive of your grandchild’s post-secondary education goals without sacrificing your own financial well-being. Listen to this podcast episode for great suggestions and expert advice from our LITs.