Quick Answer: A borrower with $124k in student loans earning $58k annually cannot qualify for cosigner release due to high debt-to-income ratio, despite meeting credit requirements. With $1,200 monthly loan payments against $3,200 income, consolidation options remain limited without significantly higher earnings or finding a qualified co-borrower.
Question:
Dear Steve,
I have total loans of $124k from a private college for a BA degree, was deceived and so was my dad into cosigning. Between the amount of layoffs and low paying jobs after school in 2010 during the crash, things are impossible.
Every weekday I read the enforcement actions, filings and fine print the outlets skip, and turn them into the one or two moves that actually improve your position — a rate worth moving for, a fee you can refuse, a deadline to beat before it costs you.
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I hope you can help me as I’ve exhausted all options. I currently owe about $82500 for private loans and $42k for federal loans totaling $124k for a BA degree. I have had ups and down with employment due to the economy and sadly degrees jobs pay so little these days. After exhausting all options, I finally am done at a 30 year repayment terms for my private loans. Now my federal ones are increasing and looking at my income they think I should pay more cause they don’t factor in outside expenses.
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I am trying to release my dad as a cosigner as we were lied and mislead my freshman year of college or else we wouldn’t be in this mess. I meet all requirements, great credit but I only make $58k per year which I get denied because my loans are so high. My dad was laid of 2 years ago and my mom does not work so I’m the only one in the family that brings in income. I bring in about $3200 a month with $1200 loan payments and my family’s home and expenses are $7k a month. The loan company says cause they are parents and not dependents I can’t use that at all that I am helping pay.
My question is- how can I get a consolidation loan or any better options and free myself from debt without a cosigner? I can’t get a 50% salary raise at work and I need to move out of my house as my family will be relocating and I can’t even afford a place to live at this point. I can’t do bankruptcy cause I am not letting this fall on my father. Any help to relieve the debt, ways to get past the cosigner piece, anything is greatly appreciated!
Samantha
Answer:
Dear Samantha,
As far as the federal student loans go you should examine an income driven repayment plan to get the lowest payment now.
But you are absolutely correct that the formula used to calculate your federal student loan reduced payment does not take into account your other expenses. The formulas are based on your discretionary income which is defined as “For Income-Based Repayment, Pay As You Earn, and loan rehabilitation, discretionary income is the difference between your income and 150 percent of the poverty guideline for your family size and state of residence. The poverty guidelines are maintained by the U.S. Department of Health and Human Services and are available at aspe.hhs.gov/poverty-guidelines.” But be careful, these reduced payment income driven repayment programs can make your debt larger. Read this.
I absolutely don’t want to sound heartless but I have to give you the truth. The Department of Education doesn’t give a damn you are helping out your parents. The opinion of government agencies like the IRS or Department of Education is just because you choose to spend your money that way it does not reduce the amount they attribute to you.
You might want to make sure the federal loans are not Parent PLUS loans since there is no cosigned federal loan anymore. If they are PLUS loans then the loans are your father’s liability, not yours.
The news about the private student loans is less awesome. A private student loan has none of the options and advantages that a federal student loan has. While your father thought he was doing something loving to assist you, he was really guaranteeing the loan if you, the borrower, could not make the payments.
To release the cosigner you’d have to pay off the original loan and to get a new loan you’d have to qualify on your own. While private lenders often say they have a cosigner release process, the Consumer Financial Protection Bureau found nearly 90 percent of such release requests are not granted.
It’s a good thing your parents are moving and hopefully downsizing to live within their income. But based on your income and obligations you are going to have to decide if your first priority is to care for your parents or repay the private loans. It sounds as if an expectation to do both is not a reasonable option.
One place to look at when it comes to refinancing your private student loans is Credible.com. There are others out there as well. Just don’t roll any federal loans into a private student loan refi or consolidation or you’ll lose repayment options on the federal loans.
And back to some honesty. Your father agreed to guarantee the loans when he cosigned for them. He is 100 percent as responsible for the debt as you are. There is no getting around that.
However, with some assistance and coordination you may decide defaulting on your private student loans and facing what may happen can be a logical solution for a bad situation. Read Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.
The bottom line is there is a solution and a way to move forward but it’s going to involve some pain, coordination, and a plan on how to address the situation rather than just winging it or letting your parents and yourself go further in the hole.
Know Your Rights: If a debt collector is contacting you, you have legal protections. See the complete list of FDCPA violations collectors commit most often. Use the free Debt Validation Letter Generator to demand proof of the debt, or check this collector’s complaint history with the Scam-O-Meter.
Before you agree to cosign in the first place, know what you’re signing up for: cosigning isn’t vouching — you’re equally on the hook from day one.
Dealing With Debt? Before you pay a collector, understand all your debt relief options — including ones the collector won’t tell you about. If the debt feels unmanageable, take the 2-minute bankruptcy quiz to see if the math favors a fresh start. Federal Reserve research shows filers recover faster than those who don’t file.
Private student loan cosigner asked.