If you are a parent who has a child about to start college in 2016, congratulations! You have raised a child who is about to impart on one of the most important stages of their life! I am sure you are very proud, with good reason. The purpose of this blog is to point out a few things I see in practice as a bankruptcy attorney that I believe parents could do better at this point financially for both themselves and their adult children.
First, if you haven’t already, do not co-sign any student loans. Student loans are rarely dischargeable in bankruptcy and if your son or daughter doesn’t pay you are just as liable. Even if it means that your child needs to work and go to college part-time to pay for school, don’t co-sign for student loans. Even if it means that you decide to get a second job to help your child pay for college, don’t sign for student loans. Did I mention, don’t sign for student loans? I’m really serious about this.
Second, once your child is 18 they are an adult and it’s time for them to have their own bank account that you do not own jointly. Legally they are an adult and owning a bank account jointly with any adult to whom you are not married is asking for problems. Specifically, if you have any legal issues with creditors in the future, it may be possible for that creditor to take all of the money in the account. I have seen this happen and I can assure you the “it’s not my money” defense does not work. Legal ownership is the only thing that matters and when you own a bank account jointly you are the legal owner of the funds in the bank account.
Third, at this point it is typically advisable for any vehicle that your child is taking to college to be registered in their name alone if you consider the car theirs. Again, legal ownership should reflect how you consider ownership. On the other hand, if you and your spouse consider the car to be yours and you are not giving the car to your child, keep the car in your name. Avoid owning a car jointly with an adult child. The reasoning is similar to the reasoning to avoid a joint bank account. The fact is that if your child gets into an accident and was at fault that you, as the joint owner of the vehicle are also likely to get sued.
Fourth, and most important, do not go into debt to assist your child with college expenses. At this time you are to be congratulated because you can take a lot of credit for helping your child get to this point. In the event you can afford to take him or her to Target for a big shopping spree for the dorm then that is fine. However, if you are going to put the trip on a credit card and know you cannot afford to pay the whole bill when it comes due, don’t do it. The same holds true for the entire length of time that your child is in college. When he or she needs/wants something that you can’t afford then don’t be afraid to say no. Hopefully your child will have a job during college and will be able to provide for their own needs and wants. If your child opts not to have a job during college then that is up to him or her. Don’t allow your child’s decision not to get a job negatively affect your financial future.
You have been doing something right if your kid is about to start college. Keep up the great work and avoid the above-referenced pitfalls to help both yourself and your child establish independent financial futures.