My Father Cosigned for My Private Student Loans and I Need Help

Question:

Dear Steve,

I owe north of $125,000 in private student loan debt all, $35,000 of which is accrued interest from deferment and the so-called “modified graduated payment plan” I had to apply for when I didn’t get any sort of job right out of college. All of these loans have been co-signed by my father.

When I left school it was the height of the recession, 2009, and I hadn’t been able to get a “real” job due to lack of real world experience and the hiring freeze, so I had to fall back on temp work and part time work outside of my field. But I’ve paid on and off on my loans, trying to bring them down. Now I am at the point where I have no more options for deferring or adjusting my payment. I still don’t have a “real job” but I am in a position experience wise to be considered for “real” jobs in my field, however, the size of my student loan payment is making it impossible for me to save money to move to the places where these jobs in my field are. Also, it’s making it difficult for me to keep up with paying the small amount of bills I have (ie car insurance, cell phone, gas money).

I’ve been lucky that my father has been kind enough to allow me to live with him while I try to figure this all out, but I’m afraid that I’m just burying myself deeper in this trench, unable to move forward without messing up my dad’s credit.

And, for the topper, I just realized that the loans that I have been paying have been assigned to National Collegiate Trust since 2008. I do not remember being informed of this. But after finding this out, I’m now concerned that this may have been an invalid debt that I validated by not knowing how to verify that NCT actually owns it.

My question is, what path or paths do I have to be able to negotiate a better payment plan? Am I going to have to ruin my father’s credit to get a payment plan that is more favorable for my situation, and that will allow me to get to a place, professionally, where I can start making bigger strides to get rid of this albatross of debt? And do I have any way of finding out if NCT actually own my debt?

Anything you can suggest will be extremely helpful.

Jamie

Answer:

Dear Jamie,

Well it would appear that your father is in on this ride with you. When he cosigned for the loans he contractually agreed to be 100 percent responsible for the debt if you did not pay. Most cosigners don’t realize this is what they are agreeing to.

So even if you defaulted to try and get a better offer than your lender is currently offering, the lender can go after your father, sue him, or impact his credit from the default.

You have no good way forward without a strategic plan that involves your father. And I would strongly suggest you setup an appointment to talk this all through with my friend Damon Day. He can give you both a plan of action about what might be possible and discuss the consequences of any action you take. Having you and your father on the same page will be critical before moving forward.

Since your loan payments were reduced or postponed, your balance must be higher now and less affordable. Deferment might feel like a gift at the time but it is really a curse.

The fact these are National Collegiate Student Loan Trust loans does raise some questions about the validity of the debt. I would suggest you read these past posts. To get to the bottom of this you are really going to need to find a consumer attorney who is licensed in your state who can give you a legal opinion.