Makin' Money

An ugly trap for the student loan co-signer

Chris Farrell Dec 2, 2010

Wonder how the fight over the fate of the Bush-era tax cuts might affect you? The Washington Post has an intriguing graphic. The three options are let all the cuts expire (no one really wants that); the Obama plan to keep taxes down for everyone but those earning a modified adjusted gross income of $250,000 (filing jointly); and the Republcian idea to make the cuts permanent.

We get a lot of queries about co-signing loans, especially from parents and their college age kids. The parental desire to help out is understandable.

The risk of ending up having to pay the loan is real, too. But I hadn’t realized that when a student dies, the bill for his student loans can live on for the co-signers. The Wall Street Journal has an illuminating story. The risk is limited to private student loans, yet one more reason to steer clear of this financial snake pit. If a student dies owing money with federal student loans the financial obligation dies with him or her. Senate legislation has been introduced to at least require lenders to make it clear to co-signers that the debt lives past death.

The New York Times reminds us that the clock is ticking on a popular tax break: The federal government’s tax credit for energy efficient investments. The tax credit is worth up to $1,5000 for investments in biomass stoves, energy-saving windows and the like. It’s set to expire on Dec. 31. Kiplinger has a story on the expiring credit here.

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