Question:
Dear Steve,
I co-signed for my daughter for her four years in college. Four private loans with Discover and four with government loans.
She graduated in 2015 and since then she hasn’t had luck getting good steady work. Used all her forbearance. Then she lands a job and was paying good and extra on private loans and lost her job late April this year and just had emergency surgery 6 weeks ago.
She had to go back in forbearance cause she evidently earned some back for payment history. But now we at the end of her forbearance again. She has no job. No money. She can’t afford private loans who won’t work with her anymore. My credit rating is being hit now. I can’t afford her payment and we ourselves are getting back on our feet from my husband’s job loss two years ago.
How do we get this Discover to lower payments so we can pay something?
But the government one we can afford just not these private.
Also, all the extra she paid is gone cause now the interest is compounding. What can we do to get ahead? She can try getting work now but we are in a bad area for money and jobs.
What can we do to minimize or get Discover to work with us? We are at wit’s end!
Shawna
Answer:
Dear Shawna,
I completely understand the frustration. Ultimately the only real solution is the magical one, a time machine.
If we could go back in time I would share with you the fact when you co-sign for a loan, you are entirely responsible for the balance. The lender looks for a cosigner so they have someone with better credit to go after. That is the entire role of the unlucky cosigner.
In that magic time machine trip, I’d also love to have a chat about how the modern student needs to evaluate the career field to determine if the return on investment of going into debt is worth the risk of taking on college loans.
About 75% of people with student loans never graduate with a degree. All they have is debt and not the brass ring at the end.
Financial contracts are strict, but life is unpredictable. Student loan agreements don’t say the debt isn’t owed if someone can’t find a job or work. They are absolute.
Federal student loans have some flexibility like Income-Driven Repayment plans that are based on income. They also offer loan elimination if someone becomes disabled and they are supposed to offer forgiveness under the Public Service Loan Forgiveness program.
Private student loans offer none of those benefits. They are essentially installment loans with a slew of disadvantages for borrowers.
If you have tried working with Discover and they are not willing to enter into a repayment plan that reduces the balances that you can afford, then your options are limited. They’ve got you over a barrel.
But here are a couple of options.
1. Top 10 Reasons You Should Stop Paying Your Unaffordable Private Student Loan.
2. These Private Student Loans Can Be Easily Discharged in Bankruptcy.
If your daughter and you can’t afford the payment then a planned strategic default, when it makes sense, is a logical option. But while it is logical, it is also emotionally difficult and will hit your credit report. If you decide to follow this path I would recommend that you talk to an experienced debt coach like Damon Day or someone else who can help educate you through this process and evaluate your situation to give you a good plan of action.
Discover is known to settle for less than the loan amount if you know where to tap and ask.
What you need most right now is a plan based on facts and logical outcomes and not a string of emotional decisions.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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