I got married 3 years ago. My husband is divorced and has a son who lives with us. My stepson started college this year and applied for a student line of credit. I was put in a position where I had to co-sign as I was the spouse of the parent. How can I cover myself financially should he not pay the line of credit?
Asked by Anonymous, Burlington, ON
I'm afraid the short answer is, you can't cover yourself. Unless and until your stepson is acceptable to the bank as a borrower without co-signers, or the institution will remove you as a co-signer, there is nothing you can do. Nothing, that is, except work with your husband to keep your stepson on the straight and narrow when it comes to paying back that debt.
The very thing you are worried about is why I hate to see parents co-sign. I've seen this very scenario go terribly wrong many times. You've signed saying that this loan will ultimately be your responsibility too!
As this student debt builds (if it does), you and your husband could lose your own borrowing power, due to the fact that these co-signed loans often show up as your loans on your credit. With this in mind, here is one thing you can do right away: go online and pay for your credit score (not your report) and see if your stepson's student loan shows up on your credit bureau.
If I were you, I'd want online access to the loan itself so that you can monitor its use and payments. I would also find other ways to help your stepson fund his schooling going forward; this might include government student loans, bursaries, scholarships, part-time work, etc. Furthermore, if you and hubby have to back him up, ask yourself what he is doing with those funds he earns from working to reduce the amount he has borrowed? I'd suggest he be required to make payments to you both now; you can tuck it aside and next year when the time comes, you might just be able to avoid the co-signing role. Ultimately, if his choices and efforts now don't have consequences that are his alone, well that's just cruel - to all of you. Good luck.