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A Brain Tumor and Private Student Loans Led to a Life Lesson. – Sally

“Dear Steve,

Daughter was dx with brain cancer while attending college away from home. She went through brain surgery, radiation and chemo. She was able to obtain her degree (took 7 years). She has private student loan debt for approx $50,000.

We co-signed her loans.

We also have Parent Plus loans for her and her sister totaling another $50,000. During this time, I lost my job and returned to college-yes more student loans $10,000. I was out of work for three years and am now working at a job making less than I was making when I lost my job.

We have cashed in all of my retirement funds to keep our heads above water. Daughter is now on SSD & SSI and unable to work due to fatique and pain related to having brain cancer.

The monies she receives pays her loans but there is no money for her to move and live on her own which right now is her main goal (age late 20′s). She is seeing doctors now that she has health coverage and hopes to one day be gainfully employed.

Our accountant has advised for our daughter and my husband and I to file bankruptcy. Is this a good idea?

We are both in our mid-50′s and don’t want to work forever, but we don’t see anyway out of this debt. When we co-signed her loans we were able to make the monthly payment if needed (until I lost my job).

Her credit is tanked and so is ours. I am currently looking for a better job and wonder if my credit report (if we file) will keep me from getting one.

Also, if our daughter does become able to work (even part-time) will this keep her from finding work?

Sally”

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The Answer

Dear Sally,

First, let me ease your mind, you should never be ashamed of problem debt that was created by circumstances beyond your control. But even if it wasn’t, there is no sense wasting a perfectly good learning experience and thank you for sharing your situation with all of us here.

The situation is really the coming together of two different situations. The first was an unexpected brain tumor. The second was the generous but incarcerating private student loan debt.

My advice on cosigning has always been. If someone asks you to cosign, say no. When you cosign you are 100% responsible for the debt but get none of the benefit.

I completely understand the motivation for cashing out the retirements funds and the love and significant care you gave your daughter. I don’t blame you for making those choices but I sure wish I could turn back the clock and have met you before you did all that stuff.

I think now is the time we need to start putting your needs first. We don’t want you to get in a situation where you are unable to work one day and your kids have to support you.

A Brain Tumor and Private Student Loans Led to a Life Lesson.   SallyThink it like having to put your oxygen mask on first before you put the kids on, you know, when you’re on the plane.

If we don’t care for you first at this point it will create a double disaster down the road.

Without any retirement or other assets, while you might not want to work forever, you will have to unless we take some swift and drastic action now. Time is not on your side and once someone passes 50 we move from a retirement concern to a retirement crisis.

As much of your efforts as possible have to be set on saving and saving for retirement. In order to do that we have to clear the decks of as much debt as we can.

A bankruptcy will not discharge the private student loans unless they have remained uncollectible past their statute of limitations. Which it does not sound like they have.

The subsidized parent loan might be eligible for some payment reduction programs but they have some long term risk. The better approach would be to get you back in a position when anyone is able to contribute enough to make the full and regular student loan payments.

I would suggest you read The Ultimate Guide to Dealing With Student Loans You Can’t Afford and review your student loan options.

It appears you have some concerns and worries about a possible bankruptcy. Most of those worries seem to be from assumptions and urban myths rather than fact. Use the links below to get the straight scoop. You’ll find one link all about getting a job after bankruptcy.

Bankruptcy Articles and Posts You Must Read

To get ready to read the information below with the right frame of mind, please first read How Do I Get Out of Debt Quickly? Change Your Mindset.

Bankruptcy Advice

Life After Bankruptcy

Filing Bankruptcy Yourself

Here is what we know for an absolute fact, if you don’t do something, this is only going to get worse. Doing a little will hold you where you are. But taking some big steps and strongly considering bankruptcy as an intervention will give you the best fighting chance possible.

Please post your responses and follow-up messages to me on this in the comments section below.

Big Hug!

A Brain Tumor and Private Student Loans Led to a Life Lesson.   Sally
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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
  • MinnesotaMama

    Hang on. I thought if a student loan borrower became disabled, student loans could be placed into what’s called “permanent deferment”. They are not written off but no monthly payment is collected on them, either. They just sit there. I would certainly contact all the student loan lenders and see what deferment/forbearance options you may have. If you’re able to put the loans into deferment, concentrate on paying down other debt during the deferment period, and free up room in your budget for those SL payments in the future.
    Best wishes to your family!

    • http://GetOutOfDebt.org Steve Rhode

      Thank you for commenting.

      For federal student loans the debt can be forgiven for permanent disability. Private loans have no such standard program.

      The problem with deferment is the balance continues to exponentially grow.

      When there is a co-signer involved, that changes everything.

      • Sally

        Steve, you’re correct and the federal loans are in the probation forgiveness period. Two years left-if she is not gainfully employed before the end of the period the loans will be forgiven. If she is gainfully employed she gets them back. Which is right. Private loans have no such program…oh Yes they do..We’re called co-signers.

  • Sally

    Steve, thank you for your quick response. I will take the time later this evening to read over the links you provided.
    You are right in that the student loans are not in a uncollectable status. We have struggled to make the payments and they were past due for some time but are now current. Two of the loans were sent to collection and one has since then been paid in full. I should have also mention that student loan debt isn’t the only debt we have. We have a home equity loan, car loan and one credit card (with a high balance). We also have a mortgage.
    I am wondering if bankruptcy would wipe out some of our debt even if it’s not the student loans and allow us to pay them off sooner.
    Sally

    • http://GetOutOfDebt.org Steve Rhode

      Well this is the perfect opportunity to adjust your lifestyle to fit a new life inside your current income and demands.

      A bankruptcy can help you wipe out some of the other debt to allow you to prioritize your most pressing needs of saving for retirement and the student loans.

      You should take the time to consider downsizing your living arrangements to save money as well. The housing expense is typically the biggest burden and then the car payment.

      This isn’t a moment of failure. It’s an opportunity for a better future.

      • Sally

        Steve, we did a refin on our house to lower the interest rate and the monthly payment. I believe it is less than what rent would be ($560.00 a month). My husband and I do plan to sit down over the long holiday w/e and discuss what are options are. My concern again, is for our daughter and making sure she has a place to live and is provided for. Her SSD monies are not much since she does not have much of a work history. We will look at where we can cut cost, talk with an attorney soon and make some changes. We believed we were making the best decisions at the time we made them but no one plans for brain cancer. It was not on our radar.

      • http://GetOutOfDebt.org Steve Rhode

        The reason they are called accidents is because they are no on purpose. :-)

        It’s time to get you guys lined up for success. Meet with the attorney to learn what bankruptcy would mean for you and don’t feel pressured. You are going to learn more, not agree to file on the spot.

        Let me know what happens from that appointment.

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