My Student Loan Cosigner Died and I’m Thinking of a Strategic Default


Dear Steve,

Currently, I have massive student loan debt, graduated in 2014 and still have $120k in total student loan debt with $55k in private student loans. For my private loans my co-signer passed away two years ago and I am currently looking at strategically defaulting.

I have a few questions on private student loan default, if I have these loans through two different companies could there be a situation where they both win a lawsuit creating a 50% Wage garnishment vs. 25%.

If I get married after I start this process could the lawsuit affect my future spouse?

And do you have any recommendations on tackling private student loan defaulting and credit cards at the same time/ would using a debt settlement company be a good option for this?



Dear Jasmine,

You asked a lot of good questions here.

Strategically defaulting on private student loans is an option but it’s not like the most amazing option out there. That would be winning the lottery and paying your loans in full.

Intentionally defaulting on your private student loan debt is a situation that is created when the loans are unaffordable and the lender is unwilling to work with you. It is also something that should be part of a larger evaluation of your financial situation to see what makes sense considering all of your debt.

If you default it is entirely possible you may face some legal action from either or both companies. Any time you break your contractual obligation the company typically follows the default options agreed to in the lending document.

If you are sued, lose, the creditor can get a judgment and can begin garnishing your wages. As I understand it, the maximum garnishment would be 25 percent of your disposable earnings.

Federal law places limits on how much judgment creditors can take from your paycheck. The amount that can be garnished is limited to 25% of your disposable earnings (what’s left after mandatory deductions) or the amount by which your weekly wages exceed 30 times the minimum wage, whichever is lower. – Source

However, I am not an attorney and for specific legal advice, you need to get the opinion of an attorney who is licensed in your state.

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If you get married this situation should not affect your spouse except for the stress it will put on both of your lives. Your pre-marriage debt does not become their legal problem after you wed.

Your final question is a bit tougher to answer. There are many flavors of debt settlement companies and solutions out there. They range from the cookie-cutter commissioned salesperson trying to sell you a debt relief product to a personal debt coach like Damon Day who can create a custom plan based on your goals and situation.

I guess a better analogy would be if you needed specialized medical care and had to choose between a drug store clinic or an experienced doctor who is an expert with that issue.

The choice is eventually up to you and some people prefer cheap over good. While I respect everyone’s right to make their own choice, I find it isn’t always logical. But that’s just me.

But it always makes sense to talk to at least three different providers and listen to what they all have to propose. Then let that information percolate for a few days before you eventually decide which solution provider you are going to select.


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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.
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