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I Co-Signed on a Loan for My Son to Attend Pilot School But It’s Closing. – Jake

By on April 14, 2011
I Co-Signed on a Loan for My Son to Attend Pilot School But It’s Closing. – Jake

“Dear Steve,

I co-signed on a $50.000 loan for my son to attend pilot school. The loan was taken out with Salle Mae. After one year the school filed chapter 11 bankruptcy. And it is looking like it will now go to chapter 7. My son had only used up 12000 of the loan. The balance of 37000 which the school had is gone. My son cannot afford his loan payment of 470.00 for 13 more years and my wife and I cannot help him. I have lost over 50% of my income. My son and I both have excellent credit.

Is there anyway that we can get his balance reduced? I have read a little about debt reduction but don’t want to get into a bigger mess. Or do you have any other suggestions? Thank you

Jake”

Dear Jake,

Sallie Mae has a process to deal with this. They publish a form to be used to request loan forgiveness due to a school closing.

The best thing to do would be to contact Sallie Mae right away and start talking to them about this particular situation. It’s probably going to be an administrative nightmare but at least there is a process.

Please post your responses and follow-up messages to me on this in the comments section below.

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About 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.

7 Comments

  1. Steve Rhode

    July 24, 2013 at 7:45 pm

    Update: Your student loans may be dischargeable. See this new article that explains why and how. http://getoutofdebt.org/53288/these-private-student-loans-can-be-easily-discharged-in-bankruptcy

  2. mama

    December 3, 2011 at 3:26 pm

    My husband & I co-signed a $60,student loan for my son. Which my son is to repay “of course”.(hum) my question is because this is for a student loan, but is a parent plus loan, will there be any help in consolidating with the Obama plan?

  3. William

    November 5, 2011 at 11:52 pm

    You are guaranteed $20,500.00 per year in stafford grad loans. You should also check into federal graduate loans. You can seemingly borrow yourself into oblivion with them both.

    –William

    • William

      November 5, 2011 at 11:54 pm

      That should have read ‘check into federal ‘Graduate Plus’ loans.

      –William

  4. Extraanthony

    November 6, 2011 at 12:42 am

    Hello Steve,

    I currently have $39,000 of under-graduate Stanford federal student loans. I will be attending law school next year and will most likely with living expenses rack up $67,000 a year for three years a total of $239,000. I have two questions, will I be able to borrow the additional $200,000 needed for law school from federal loan programs or must I get private loans as well? Also, will Obama’s new student loan plan apply to my graduate (law School) loans as well as my under-graduate loans or will they just apply to my under-graduate loans? Will I be able to cap it at 10% of my income if needed for awhile and will the 20 year max also apply? 

    I guess that’s more than two questions. Thanks Steve

    • Steve Rhode

      November 6, 2011 at 2:17 am

      Federal loans may be available to you. The best place to check and see which graduate loans fit you best will be the school financial aid office.

      Avoid private loans at all costs. There is nothing good that can happen with those.

      Any future federal “Obama Student Loan Program” will NOT apply to private loans. It’ still too early to know what the final program will look like but if it closely resembles the current Income Based Repayment program their may be income caps that might exclude you.

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