Dear Mr. Berko: Our beautiful 27-year-old son, who started school in 2008, owes $87,000 in student loans and has three more semesters to go to complete his degree in English literature. He loves Shakespeare and hopes to teach literature at the high-school or college level. He needs about $31,000 to complete his bachelor’s degree. He wants to consolidate this $31,000 with the $87,000 he owes so he can make one payment, but he needs us to co-sign on his loan. Our stockbroker thinks we shouldn’t co-sign and recommends that we sell $31,000 worth of losers in our portfolio to finance the completion of our son’s schooling. We have enclosed our portfolio and would appreciate your selling advice, too. This is beginning to drive us a little crazy.
— B.R., Rochester, Minn.
Dear B.R.: They say insanity is hereditary. We get it from our children!
In 2007, $510 billion in student loans was outstanding, and that amount may triple to $1.5 trillion this year. When the government funds a program or service, the costs explode — usually exceeding the funding limits — and the quality of the program or service implodes. Good examples are public schools, food stamps, home mortgages, Medicaid, college courses and Supplemental Security Income.
You won’t like my response, but a beautiful 27-year-old son who loves William Shakespeare (a bloody bore to read) and needs a year and a half to get a Bachelor of Arts is a bad investment. The national appetite for Shakespeare at the high-school or college level is dismal. And I wouldn’t hesitate a Minnesota minute wagering my two 1916-D Mercury dimes to a road apple that your beautiful 27-year-old son would eventually leave you with a huge unpaid balance on that loan if you were to co-sign. Sons, daughters, nieces and nephews find it much easier to default on loans from a relative than from a bank or a private lender. And sometimes those family borrowers plan on it! At least once a month, a reader will complain that he’s hounded by his kid’s student loan, that he gets dinnertime calls from lenders seeking payment or that his credit has been damaged. One father, who was pursued relentlessly to make good on his daughter’s $116,000 loan, liquidated a retirement annuity, paid a 7 percent early-out penalty and then had to sue his daughter for recovery (and lose) in order to deduct some of the loss from his gross income. Then his accountant advised the daughter that she had to pay federal taxes on the $116,000 loan forgiveness, which is treated as income.
