How Can I Stop Being a Cosigner on My Ex-Wife's Student Loans?

Question:

Dear Steve,

I cosigned on two private student loans for my ex-wife when I was 23. Oops. It was during the time when a lot of private loan companies were very predatory. Each loan was for about $40,000 (Total $80,000). My ex and I agreed via a bi-lateral agreement that she would take all responsibility for these loans and their payments (I realize the loan company doesn’t care about this). One loan is in “decent” standing, she is on a terrible payment plan with them, but at least she is paying.

The other loan is the one that is bothering me. According to the collection company, she has not made a payment in 5 years. Not one. I was never really contacted aggressively about this loan. Occasionally I would receive a letter, but she always said she was getting it under control. Apparently not the case. It is now a hideous mark on my credit. My fault again. This leads me to my question.

I am trying desperately to get off of this loan. The loan company is not budging. I offered 10K to remove me, and they denied. I do not want to pay anything else towards this loan, however I do want to try to buy a house at some point in the near future, so you can see the dilemma.

I have started to read more about how a statute of limitations may have run on this loan (CA is 4 years)? Especially since a payment has not been made in 5 years. Is this an avenue worth pursuing? If so, does one generally approach this topic with the lender? Or is it wiser to wait until sued and present it as a defense?

Is there precedent for this working on a private loan?

Thank you!

Joe

Answer:

Dear Joe,

Yep, that’s another good example of why never to co-sign. I’m sure at the time you thought you were doing an amazingly kind and helpful thing when agreed to be responsible for these loans. Lesson learned, you got screwed.

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There is no incentive for the lender to let you off the hook on a delinquent loan unless you can come to an agreement with them. And it sounds like $10,00 isn’t the magic number to do that. You’ll probably have to get up in the half of the current balance range to settle the debt.

None of this will eliminate the bad debt being reported by the lender. That payment history will remain.

Just because the statute of limitations may have expired, that does not eliminate the debt on your credit report or mean the collector still can’t try to collect. It just means they could not sue you over the old debt.

It seems you have a couple of strategies. First, if the loan is out of statute then you would be able to file bankruptcy, terminate your responsibility for the debt, and that would end it.

Second, if you wanted to just sit tight and hope it falls off your credit report after 7.5 years from the time the debt was reported delinquent, then you have to hope your ex-wife doesn’t do anything to accidentally start the clock over on the debt.

For specific assurance the debt is actually out of the statute of limitations, I would urge you to meet with an attorney licensed in California, where you live, and discuss your case.