Beware of making commitments you can't afford

I'm talking back and forth with a couple I've known for some years, who recently found their lives turned upside down by one of their children's study loans.  They had signed as guarantors of the loans, because the university's financial advisor had assured them that it was "just a formality", that "everybody does it", and that if they didn't step up to their plate, their child "would not get the high-quality education she deserves".

How many of you have endured the same pitches from your kids' universities and colleges?  Sound familiar?

Well, in this case, reality bit.  Hard.  Their daughter was involved in a car accident, resulting in permanent partial disability.  She's only halfway through her studies, but will never be able to complete them.  She's no longer capable of working in her chosen field, and the permanent effects of her injuries will restrict the number of alternatives available to her (and her future income, too).  She may be dependent on her parents for at least a roof over her head, if not physical assistance with the daily necessities of living (like taking a bath, or getting dressed) for the foreseeable future.

Her parents are good people.  They're more than willing to step up to the plate and help meet their daughter's needs.  However, just as they began to pick up the pieces of her former life, along came the bills from her student loan providers.  She's on the hook - or, rather, since she's no longer earning, her parents are on the hook - for over $60,000, and repayments start at once.  Putting all her needs together, they'll need to find at least an extra $1,000 per month - but they don't have it.  They've asked her siblings to help, but both of them are just starting out in life, not earning great salaries, and they have their own needs - including their own student loans.  They probably won't be able to come up with much.

I'm very sorry for all those involved, but they basically brought this upon themselves.  The daughter wanted an education she could only afford by taking out student loans.  That was the first bad choice.  If she'd chosen a more affordable field of study, or worked to save enough money for the field she wanted before entering that program, she wouldn't be hurting financially right now.  If her parents hadn't guaranteed her student loans, they wouldn't be on the hook for her debts now.  All three of them are stuck with the consequences of their unwise decisions.

Moral of the story:  be very cautious about standing surety for anyone else's financial liabilities.  No matter how remote the possibility, there's always the chance you might find yourself on the hook for them.

Peter