Navient Sallie Mae

Do We Really Have to Repay This Old Student Loan?

Written by Steve Rhode

Question:

Dear Steve,

My husband attending the Connecticut School of Broadcasting in 2008. The school closed in 2009, in the middle of him going to school. He was one of the few who showed up at the campus to find the doors chained and locked.

We’ve been fighting to pay off his student loan since then. At some point, Sallie Mae became Navient and then his sister, a co-signer of the loan, declared bankruptcy. She was able to use the student loan as part of her debt to file and it was pulled into the case. Now the case has ended and we’ve received a letter that the loan was not discharged with the rest of the debt.

Since the school closed and my husband never received a diploma as he never graduated from the school, can we do anything about this loan?

During the bankruptcy case, the loan had been sold off three or four times and it seems like the balance never really got reduced even though there were payments on it the whole time.

This new development of finding out that we’re going to have to start paying the loan has blindsided us.

Natasha

Answer:

Dear Natasha,

It sounds as if there are several issues going on here.

These loans sound as if they are private student loans.

The fact your sister-in-law included the debt in her bankruptcy is not material since she was a cosigner and not the primary account holder. With a cosigner on a student loan, the lender always has the primary borrower to go after and the cosigner.

So while the cosigner may have received some potential relief from the loans, her bankruptcy would have no impact on your husband. He would still owe the debt.

If this is a private student loan, as I suspect, the loan would not have a closed school discharge eligibility since only federal student loans have that option.

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All is not lost. You have some issues that you could use to explore relief from these loans. I don’t know when you last made a payment on the loans but the debt might be outside the statute of limitations in your state. You could raise that as a defense if you are sued. The loans may have traded hands so many times and with incorrect accounting that the loans and payments made should be verified to see if it is collectible at all. I would advise contacting a student loan consumer attorney in your state.

The private loans can still be settled for less than the full balance and some consequences go along with that option. I would suggest you talk to Damon Day and get a consultation about your options with that approach. He can explain all the consequences and options for you.

But because of the school, the loans may also be eligible for discharge in bankruptcy if your husband filed for bankruptcy protection. You can find a good local bankruptcy attorney and have a free discussion about what bankruptcy would mean for you. Bankruptcy is the fastest way to get a fresh start for the least amount of money.

Ironically, while the Connecticut School of Broadcasting did close temporarily but it reopened after its bankruptcy filing and operates today.

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About the author

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.

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