Should I Lend Money to My Child?
It's risky, but a new service might make it easier to get paid back
Corrected on 4/11/08: A previous version of this article referred to the company as Virgin America
Can I make my student pay back my parent loans?
Short answer: no.
But an intriguing new service, Virgin Money's "Student Payback" offers (for $199) to set up a contract requiring students to repay parent loans. Just like a credit card company, Virgin Money will bill the student monthly (for$9 a bill) and report tardy payers to credit bureaus.
Will it work? CEO Asheesh Advani says these are legal, enforceable contracts, but that doesn't mean parents are more likely to sue a child.
Deanne Loonin, staff attorney for the National Consumer Law Center, warns that if the student reneges on the contract, the parent will still be on the hook for the loan. The Student Payback contract, she says, "seems mainly to scare the child/student into paying." But a sufficiently scary parent can create a free contract "by just writing out a contract on a piece of paper and having everyone sign it."
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