April 23, 2020
First the good news: When students want to borrow money for college, lenders usually require a “cosigner" who will be responsible for the debt if the student is unable to repay it. But anyone can cosign a student loan, whether the cosigner is related to the student or not and whether the cosigner is still working or not ... as long as he or she has adequate income or assets (e.g., a home, stocks, other investments or savings) to cover the loan if the student should fail to make the required payments. So just because your grandfather no longer has an earned income doesn't mean that he can't qualify to cosign a loan. And if he has a high credit rating, this may help you to get a lower interest rate on your loan.
Now the bad news: Even if Grandpa has a strong credit rating and sufficient assets to cover your loan right now, the lender will scrutinize those assets to make sure that they aren't already earmarked for living expenses for him and your grandmother. And if your grandfather does pass muster and is approved as your cosigner, you need to understand that you are putting him in a vulnerable position if you can't make your loan payments yourself. Obviously, as you begin your college career, you are probably optimistic about your future and determined to finish school and get a job that will allow you to manage your debt on schedule. But, as Beatle John Lennon so aptly said, “Life is what happens to you while you're busy making other plans."
Here is a short but helpful article about cosigners from LendEDU: Share it with your grandparents. It offers advice that all prospective cosigners should consider, such as, “Read the fine print regarding the definition of default. This could differ from lender to lender, and it's an extremely important detail to understand if you're a cosigner." While this may seem like an obvious precaution, you might be surprised by how many cosigners are blindsided by not only getting stuck with loan payments themselves but also (and especially) by the unexpected terms (or penalties!) they're facing.
Finally, if your grandfather has reservations about serving as a cosigner but your parents have bad credit, you are not automatically out of luck (and money!) Your parents can apply for a federal “Parent PLUS Loan." Yes, they will probably be turned down (but not necessarily because the requirements for a Parent PLUS Loan aren't exactly the same as those for a private loan). But if your parents are denied, then you will be allowed to take out loans yourself up to a specified limit, which is currently $9,500 to $12,500 per year. (As you progress through college, the limit goes up.)
While these amounts won't make much of a dent in private college tuition, they can be added to need-based aid or merit scholarships that your college offers, and they will go further when you attend an in-state public institution.
Of course, if your grandfather is willing and able to serve as a cosigner, you could borrow a lot more and this could broaden your college options ... but it could also mean unwieldy debt down the road. So before you proceed with any type of loan, you should envision a range of outcomes. Sure, your own future will be front-and-center in your fantasies, but even your grandparents ... as ancient as they might seem to you ... have a future as well, and you need to do your part to protect it.
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