A recent Wall Street Journal article indicates that an increasing number of parents and grandparents are being affected by student loan debt: http://blogs.wsj.com/bankruptcy/2012/10/29/soured-student-loans-bankrupt-parents-grandparents. From the article:
As young graduates and former students struggle to find work, their student-loan obligations are increasingly falling to the family members who agreed to back the debt in the event of default. Bankruptcy lawyers report that a growing number of student-loan co-signers, especially grandparents, are trying to get rid of the loan obligations using bankruptcy, hopeful that they’ll find a sympathetic judge or a lender who’s voluntarily willing to lower payments.
Unfortunately, borrowers usually don’t receive favorable rulings in bankruptcy court, so parents and grandparents who co-sign for their children’s’ and grandchildren’s student loans are often left footing the bill. This puts retired parents and grandparents in difficult predicaments due to being on fixed incomes.
My advice to parents and grandparents considering co-signing on student loans: Don’t do it, especially not if it’s for an undergraduate degree. If your prospective college student wants to attend a private undergraduate university but cannot afford it without sizable student loans, take a look at the many great public universities. Remember that while higher education can be financed via loans, you can’t take out a loan for retirement.