If you’re thinking of co-signing for your child’s college loan, let the borrower beware. One grieving mother learned the hard way what this means. According to the FT, when Ella Edwards’s son Jermaine died at 24 years old, she planned to enter retirement and quietly cope with her loss. Instead, she was forced back to work as a seamstress for $9 per hour to pay off the $40,000 educational loan she had co-signed with her son. What Edwards’s case shows is that loan companies seem to have taken taken a page out of Tony Soprano’s playbook, profiting from the predicaments of cash-strapped, guileless borrowers.
Edwards went on the radio to warn other parents about the risks of co-signing a loan and, mercifully, some Good Samaritan responded: she received a private donation to help her pay off the balance. But her story points to a wider problem in the university system. Over the past decade, higher ed costs have risen by 40 percent, creating $1 trillion in outstanding debt. Educational loans are now second only to mortgages as a share of consumer debt, and 11 percent of these loans are now in financial distress.
Even if you avoid co-signing for a loan, you will still pay a price. Current higher ed costs and loan rates not only harm students and parents; they also keep the economy depressed by saddling young people with so much debt that they delay or give up on major life decisions like marriage, buying a house, or starting a family.