student loans

Mom struggling to pay son's student loans

Don TaylorDear Dr. Don,
I co-signed several private student loans for my son when he was in college. Is there a company I can contact regarding possible consolidation of these loans? I will probably still need to be a co-signer, but I would like to have just one payment and also reduce the rate of interest. My son has not been able to afford the payments since he completed college. I have been making them so my credit score won't be damaged. But I am slowly sinking and would like to find a way to get out of this mess.

Thank you,
-- Tina Turnaround

Dear Tina,
There are financial institutions willing to consolidate your private student loans. As you point out, by consolidating the loans you end up with just one monthly payment. The size of the payment depends on the interest rate and the loan term. Extending the loan term can reduce the monthly payment but can boost the loan's total interest expense.

The interest rate will depend on your credit score and income. Whether it will be lower than the existing loan rates should be easy to determine by shopping among lenders. Lenders typically offer both fixed-rate and variable-rate loan programs.

What you want to avoid is applying to multiple lenders because each loan application puts a credit inquiry on your credit report. Multiple inquiries reduce your credit score. An inquiry stays on your credit report for two years but is used calculating your credit score only for the first year.

While reviewing loan programs, watch loan origination fees, which can be as high as 5 percent. If your son remains the primary borrower, then you'll probably also want to know what's required to eventually get released as co-signer.

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