My Father Did Not Pay My Private Student Loans and Now I Owe Them

Question:

Dear Steve,

My father took out student loans for me, and I was a co-signer.

I took out my own student loans in only my name as well.

We agreed that we would each pay the loans in our own names. So after I graduated, I began making payments on the loans in my name and expected he was paying him – but apparently, he wasn’t.

I had essentially moved out and never had any idea that he wasn’t paying. I only found out when I tried to apply for a mortgage with my husband.

Now the loans are in default with a collection agency, and I feel like I’m doomed! But, on the other hand, they are private loans, and I understand my responsibility as a co-signer.

I’ll pay what I can, but do I have any leverage, having never been notified of the loans defaulting?

Do I have any leverage with the collection agency that now owns my private student loans? For example, if I initiate contact with them, will they try to garnish my wages?

Joss

Answer:

Dear Joss,

Ultimately you have a responsibility to keep the lender notified of your current address. Unfortunately, it sounds as if you may have moved around a bit between the time you agreed to be 100% responsible for the loans as a co-signer.

I don’t think if they did not have your correct contact information, it gives you any leverage.

The underlying facts are as a co-signer, you are the fallback person the creditor can go after if the primary borrower does not pay. I find many co-signers think they are just participating to help the borrower qualify for the loan. That would be incorrect.

I would imagine the balances have grown, and fees have been added to those accounts.

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Your options at this point are to pay the balances, arrange a payment plan, talk to my Debt Coach friend Damon Day to see what your specific lender normally does about reducing the balances due, or talk to a local bankruptcy attorney to see if you could file bankruptcy and discharge those debts. Unfortunately, private loans have some loopholes.

Damon Day has had luck talking to private student loan lenders to release co-signers or negotiate more favorable repayment terms.

Sadly, your situation is not unique, and I’ve seen it many times. But, unfortunately, these financial surprises can break a family apart.

There is no doubt your father should have notified you when he was struggling to make payments and given you some warning. But, unfortunately, we can’t turn back the clock now.

I’m afraid you will have to face you are responsible for the loans. Most likely, the lender could not reach you, and you will have to take action to deal with this now.

If you don’t, it will appear on your credit report, and you could actually be sued over the debt. So some plan to assume the responsibility for dealing with this in one way or another is your most logical path.

Sincerely,

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.