OT: Parent based Student Loan Advise needed

[jtung230]

I think the market is telling you that the debt is viewed as high risk given her income. Her parents are not the bad guys. They co-signed to so she can get the loan. She made the choice to borrower. Banks only like to lend money to people who have money.

She does have one other option that no one mentioned. She can Trump the debt (default) and force her parents to deal with it. Not what I would do especially with family. But it's an option.

 

[RU85inFla]

I think the market is telling you that the debt is viewed as high risk given her income....

Think about it, she is paying over 33% of her disposable on this loan. You wouldn't make a secured mortgage loan with those numbers. That is exactly what the bank is saying to her. Great she has a 720 but as we all know scores are somewhat volatile so let's say she floats between a 700 and 740. She is much more middle of the road that having a good score. The bottom line is significant reductions in the debt will be all that moves the score for a while. One 30 day delinquency could have a major impact.

 

[PeteGiam07]

Think about it, she is paying over 33% of her disposable on this loan. You wouldn't make a secured mortgage loan with those numbers. That is exactly what the bank is saying to her. Great she has a 720 but as we all know scores are somewhat volatile so let's say she floats between a 700 and 740. She is much more middle of the road that having a good score. The bottom line is significant reductions in the debt will be all that moves the score for a while. One 30 day delinquency could have a major impact.

How is that possible if it is a Parent-based loan and their combined income is 200k+? I don't see how just her income comes to play in this and not theirs. First Citizens apparently told the parents their own credit is rating is the reason why they couldn't refinance the loan not my fiancee's income or credit...

 

[RU85inFla]

Think about it this way. Especially with college loans, when you have a co-signer typically the loan is a good loan with the one person but they may have a little risk. Not in the ability to re-pay the loan but uncertainty that is created by the lack of history, employment or income. I know the name of the loan is a Parent loan in this case but clearly it is for her to go to college and her parents had no intention of paying 100% after graduation just by the fact that both names are on the loan. If they were going to pay the loan off, they didn't need her to co-sign for them because she would have added nothing to the application from a risk mitigation perspective. They co-signed for her loan.

Banks lend to your fiance because most kids go to college, graduate and get a good job where they can afford to pay back the loan. If they can't, they get married and jointly the 2 grads can pay off their loans or mom and dad help out. Additionally student loans are very hard to be discharged in bankruptcy and what new family/grad wants to start their career that way. From a lender's perspective the loan was to your fiance with a backstop of her parents if she defaults. Your fiance should be the one talking to the bank not her parents - it's her loan.

However, think about it from the bank's perspective:
1. It's you fiancee's loan. She is a recent grad with a reasonable income.
2. She has no other options by herself. She can't take on the unsecured loan by herself and has nothing to secure it with.
3. Mom and dad are probably not gonna use their House to secure the debt because that would be crazy.
4. Therefore, why would the bank reprice the debt from 7.5% to something lower.

Bottom line is you fiance's parents felt no obligation to help her with college and never manned up and told her that.

 

[shu99]

How is that possible if it is a Parent-based loan and their combined income is 200k+? I don't see how just her income comes to play in this and not theirs. First Citizens apparently told the parents their own credit is rating is the reason why they couldn't refinance the loan not my fiancee's income or credit...

Was this a Parent PLUS Loan? If so, the loan is completely in the parents name (they aren't just listed as co-signer, they are the actual borrowers). If so, it might be worth a conversation where she tells her parents that she can no longer make the required payments on the loan and that she needs them to help out in some way. Ultimately it is their credit on the line. Not that you want to walk away from the debt completely (that would likely ruin the family dynamic) but it might force them to take a more active role in paying down a debt that their name is listed on.

 

[PeteGiam07]

Was this a Parent PLUS Loan? If so, the loan is completely in the parents name (they aren't just listed as co-signer, they are the actual borrowers). If so, it might be worth a conversation where she tells her parents that she can no longer make the required payments on the loan and that she needs them to help out in some way. Ultimately it is their credit on the line. Not that you want to walk away from the debt completely (that would likely ruin the family dynamic) but it might force them to take a more active role in paying down a debt that their name is listed on.

YES, it is! This is the problem! I told you guys I wasn't good at understanding these loans, it is confusing if you don't have someone to talk about them...

Fiancee is making all payments while it is in the parents name. This is why we don't understand why refinancing can't happen for them. At this point we feel as if we could get a better rate without the parents even involved since they contribute NOTHING and don't even check on the loan....

As far as taxes go I hate that the parents get credit for these payments and I am switching her to my trusted account next year and not the parents accountant. Apparently they have their accountant take into account my fiancee's payments, but I don't believe them.

 

[RU205]

If she is making 100% of the payments why do they get the tax credit ? I don't understand that. Do they have other kids that they are supporting financially?

 

[PeteGiam07]

If she is making 100% of the payments why do they get the tax credit ? I don't understand that. Do they have other kids that they are supporting financially?

Loans and payments in parents name technically, but the money is coming from her bank account.

Yes they do 1 more daughter who probably has the same kind of loan. That daughter does not do well with payments and we are tired of her making our situation worse because it is probably making the parents credit worse.

 

[kupuna133]

YES, it is! This is the problem! I told you guys I wasn't good at understanding these loans, it is confusing if you don't have someone to talk about them...

Fiancee is making all payments while it is in the parents name. This is why we don't understand why refinancing can't happen for them. At this point we feel as if we could get a better rate without the parents even involved since they contribute NOTHING and don't even check on the loan....

As far as taxes go I hate that the parents get credit for these payments and I am switching her to my trusted account next year and not the parents accountant. Apparently they have their accountant take into account my fiancee's payments, but I don't believe them.

Tough way to start a relationship with the burden of excessive debt. Even tougher to start the relationship when you have a negative view of her parents. When push comes to shove these are her parents and it will eventually lead to a major stresser in your relationship with her. Tread lightly my friend tread lightly...Holidays will be a disaster if this goes the wrong way....

There are 3 sides to every story. Make sure you know all the facts before confronting the parents. The deal may have been they would pay for x amount (in state tuition) and you are responsible for every thing above x. This was the case for a friend of mine that was saddled with $40k debt in 2 years because he wanted to go private vs. in state public.

 

[jtung230]

Your first step is to call the lender and get all the details. Good question to ask is who is the loan recourse to.

 

[BelieveinRU]

Don't be so quick to judge. I'm not saying your wrong but many financially secure people partake in payment plans and ccs for what I call interest rate arbitrage and tax savings. They may not have shared all of their financial information with you

Yep, my thoughts too. They have multiple CC's and for some reason fianance everything. I don't get it. A sit down is probably going to happen with them and they want to buy us something for our new condo. In which me and the fiancee have already decided to turn them down and not accept any gifts from them not in the form of cash to help with the debt.

For those asking her credit is good with a score above 720. I looked into it years ago and taught her how to bring up her previous 600 score up.

 

[RU85inFla]

Please stop worrying about the name on the loan. You can rename it grandma loan and it doesn't make grandma any more responsible.

You stated the loan is co-signed by fiancé and parents. For all intents it's her loan. From her perspective. From their perspective it's theirs. Both are equally liable. But she really has no option to not pay. Her name on the loan docs then she pays, regardless if it's called parents loan.

Go to citizens bank website. You can get a parents loan signed by student only, parent only or both.

We know your fiancé can't get an $84k unsecured loan by herself. I believe the bank may be saying the same to the parents. They may have good credit but don't have the capacity to pay $1000 incrementally every month. If they refinance, the bank loses leverage. Student loans are very hard to discharge. Personal loans are not. Bank would be in a much worse position.