Empty Nesters: The Latest Group Finding Themselves Feeling The Squeeze By Delinquent Student Debt

The Wall Street Journal reports:

• After years of facing all sorts of financial pressures they never expected, from adult kids moving back home to their own parents needing help to retire, empty nest parents are struggling with a new headache.
  
  Thinking it was only natural to want to help children and grandchildren, many co-signed student loans. Now, they're becoming the latest victims of the nation's mounting problem with student-loan debt, which surpassed the $1 trillion mark last year.
  
  At a growing rate, young graduates who are either out of work or who didn't land high-paying jobs find themselves unable to pay their loans. When primary borrowers stop paying, co-signers are expected to pick up the tab—and soon find themselves fending off debt collectors.
  
  "People are confused about what it means to co-sign, and their ongoing obligation," says Deanne Loonin, director of the Student Loan Borrower Assistance Project at the National Consumer Law Center, a consumer-advocacy group in Boston. "When they come to understand that they are equally liable, the regrets set in."

***

• It is almost impossible for someone who co-signed a private student loan to escape the debt. A bankruptcy-code change in 2005 made it much tougher for borrowers or co-signers to discharge private student loans in bankruptcy. The main avenue for ending the payments is to prove "undue hardship," and the hurdles are high, says William Brewer Jr., president of the National Association of Consumer Bankruptcy Attorneys, a trade group in Washington, D.C. "The court can take the position that all you need to do is sell your house," he says.

For more, see New Peril for Parents: Their Kids' Student Loans (May require paid subscription; if no subscripton, GO HERE, then click appropriate link for story).