The student loan industry has been viewed with much skepticism over the past few years due to the fact that the percentage of loans over grants and scholarships has increased drastically. This is bad news by itself because many students will not graduate and find a job that enables them to pay off the loans, leaving them to either default or reduce their standard of living. Some schools default rates are so high that federal loans are being removed from the financial aid package entirely.
Until today I thought that default rates and ability to pay the loans back were the only issues.
On the first day of spring semester a parent came into the financial aid office to show me a letter the person received from a bank. It was a disclosure letter meant to inform the person of the $20,000.00 student loan they cosigned for. The problem is that the person didn’t cosign for any loans. Apparently, one of their children signed up for this loan, didn’t have the credit worthiness, and then forged the parents name on as a cosigner. I’m not bashing the bank exclusively here because the child obviously has some ethical issues, but I do believe the bank should have controls in place to prevent children, or anyone for that matter, from randomly putting someones name on there to guarantee the loan.
Luckily, the parent called the bank in time and the check was never sent to the child. If for some reason the parent never caught this fraudulent act, they would be liable for $260 a month for the next 20 years.
How’s that for someone on social security.