I Co-Signed With Sallie Mae for My Daughter. Now They Want to Sue Me.

“Dear Steve,

I am having an issue with Sallie Mae student loan debt that I co-signed for. They are threatening to sue me since my daughter cannot pay the debt. I am unemployed and have been out of work off and on for over 6 years. I have only worked 5 weeks this whole entire year. I have no assets and no home or no money to pay this debt. My credit has already taken a terrible hit and I am afraid if it default that I will not be able to find a job or buy a home once I do find a good paying job. What can I do?

If the Sallie Mae loan goes into default what will the impact have on my credit? Will it prevent me from find a job? If they sue me will they garnish my wages? If they sue me will they settle for less than the full amount of the loan?


Dear Glendora,

When you co-sign you agree to be fully financially responsible for the debt if the student can’t pay. So it is no surprise Sallie Mae says they may sue you over the debt. That is exactly what you signed up for.

What is entirely unclear from your question is if this is a federal student loan Sallie Mae is servicing or a Sallie Mae private student loan. It makes a hug difference. If this is a federal student loan then your daughter would just have to follow this guide for a no dollar monthly payment based on her income. If it is a federal loan there is a nearly magic solution for the situation.

However, if this is a Sallie Mae private student loan there are limited options.

Your statements are confusing. On one hand you have only worked five weeks in 2014. You have no assets, no home, and no money to pay. But on the other hand you are worried about your credit and settling the debt. Settle it with what?

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If you had access to about 50 percent of the student loan balance then there are opportunities to settle the private student loan debt for less than you owe. And if you had steady income you might even enter into nearly zero percent interest repayment program. Some good private student loan options exist but solutions take money or income. Neither of which you claim to have.

In that case, your daughter will have to make suitable repayment arrangements with Sallie Mae to keep you from being sued.

When it comes to your credit worries, you don’t seem to have any active unsecured credit reporting to the credit bureaus so who even knows what your credit score is now. And you’ve even said your credit has already taken a “horrible hit.”

Your credit report is a listing of your financial history as reported by participating creditors. Not all creditors participate and not every creditor reports to every credit bureau. Your credit score is a numeric value that indicates to future creditors how much of a risk you will be to lend to.

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Credit scores are easy to improve. Just read this and this about how stupid easy it really is.

So if you don’t have any assets to use to settle, that’s off the table. If they sue you it sounds like even if they win you are judgment proof. What would they go after?

But if they sued and you lost, if you begin to work in the future they might discover who your future employer and could then go for a wage garnishment. But what does the future look like for you. Are you going back to work or just think you will remain basically unemployed?

But you could defeat that by entering a Chapter 13 bankruptcy at that time.

It’s not that you don’t have options now, but you have to alter the current situation in order to have better options.

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Damon Day - Pro Debt Coach

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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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