My Daughter Spent a Lot of Her Student Loans on Living Expenses, Not Tuition

Dear Steve,

I co-signed for approximately $35,000 worth of school loans for my daughter. She graduated from Chatham University in 2010 with a bachelor’s degree in psychology. She could not find a job in her field paying over $25,000 per year.

She went back to school and has since graduated with her degree in nursing and is taking her boards this month. She had all of her loans deferred for 2 years. She owes approximately $130,000 to Sallie Mae and AES, all private loans.

After reading your article, my question is this. I do not have exact figures as yet but a lot of her school loan money went for rent, utilities, etc in her senior year of Chatham College. I would also pay for her full tuition using my own personal credit card which had at the time a high credit limit.

We would apply for a student loan and pay off my credit card with the money. The money always came to us….not to the college.

Can she qualify to get some or all of her debt discharged based on the above information?


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Dear Brenda,

I believe what you are asking about is the apparent spending of student loan funds that were not for qualified higher education expenses. That part of the loans may in fact be eligible for a discharge under a bankruptcy adversary proceeding. You can learn more about this subject here.

For the specifics of your situation you would need to meet and talk with a licensed bankruptcy attorney in the state your daughter lives in.

You can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.

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But it sounds as if your daughter went to a publicly accredited school and that makes things tougher to deal with. The loans would not be automatically dischargeable as if she attended a non-accredited school.

Any loans you cosigned for are your responsibility, even if your daughter manages to discharge her liability. As a cosigner you get 100 percent of the liability and zero percent of the benefit. Never, ever, ever, ever cosign.

Before you make any assumptions one way or another, talk to a bankruptcy attorney in your state.


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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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