The Next Bailout: Your Adult Children?

More parents face tough questions in the months ahead about whether to bail out their kids, and how to structure the aid if they do. So far the credit crisis has struck young borrowers “only a glancing blow”, reports the Wall Street Journal. The government has shored up access to student loans, and rates of forebearance and loan-deferral are up sharply, holding down defaults.

The problem is the number of undergraduates and young adults who are heavily leveraged as the economy weakens and starting salaries fail to keep pace. The stakes are high, including the risk of default, or ruined credit, or lost opportunities to attend graduate school or buy a home … even wage garnishment. Parents, too, are on the hook if they co-signed for loans, as lenders increasingly require. What to do? The Journal quotes the director of a credit counseling service, who says parents need to get their kids on a budget, and if necessary help out with a loan – not a gift – with a written repayment agreement. Your thoughts?