My Daughter Took Out Student Loans. I Couldn’t Co-Sign. Her Grandmother Did. Now She Can’t Pay. – Lorrie


“Dear Steve,

Four years ago my daughter decided to go back to school. She took out student loans through Sallie Mae. I tried to co-sign for her but was turned down… my mother was not.

So now we have a problem of course, my daughter has 2 children, no job and the ex-husband doesn’t work either.

My mother (the co-signer) is 80 years old and is on a fixed income. Sallie Mae calls my daughter for pmts but of course she has no money to pay them so the harass my mother.

What can we do about this?


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Dear Lorrie,

Another example of why I hate student loans. People constantly perceive them as good debt, but the majority of people that have student loans never graduated with a degree.

Here is the deal with co-signing, it means you are totally responsible for the debt if the loan goes bad. You 80 year old mother is on the hook for these student loans of her granddaughter.

And to make the matter worse, she can’t break her bondage to these debts without a Chapter 11 bankruptcy, which will be expensive. A regular bankruptcy can’t remove or discharge student loan debt and even the SallieMae site says:

If you’re having serious trouble paying back your debt, bankruptcy is not an easy out. In fact, bankruptcy should be considered an absolute last resort. And, after all your effort, student loans are not normally included in a bankruptcy filing.

Unless you can show that your education loan payment is an “undue hardship” on you, your family, and your dependents, your student loans are ineligible for cancellation (discharge) in bankruptcy.

It is difficult to prove “undue hardship” unless you are physically unable to work and there is no chance of your making money. To discharge your student loans under this special case, you must file a separate motion with the bankruptcy court and present your situation before a judge.

Your daughter, her granddaughter, has placed her in a horrible position by defaulting on her loans. I realize that it is what it is, but it is grossly unfair to your mother. Then again, life’s not fair, is it?

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If you want to rescue your mother from this position I think you need to contact a local bankruptcy attorney and go in and explain the situation. The bankruptcy lawyer can give you an estimate of how much a Chapter 11 bankruptcy will cost.

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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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