my friend co-signed on her daughters student loans, private and government, and her daughter is not paying on the loans. My friend is being contacted by the loan providers for payment. If she doesn’t pay them will her credit be affected and can her social security be garnished? How can she get the calls and letters from coming?
Yes, she is fully responsible for the debt. Co-signing means exactly that “if this person does not repay, FOR ANY REASON, I will assume the debt in full”. It does not matter if her daughter dies, or becomes incapable or unwilling to pay the debt, the loan providers can use any legal means to collect that debt, including garnishment, possibly liens against any property the co-signer owns. If she does not pay, her credit will be ruined, and even paying slower than the loan collectors demand will seriously dent her credit rating. She needs to contact both her daughter and the collectors and work something out, possibly with the help of consumer credit counselors or a lawyer.
Why does the loan provider require a co-signer? Because they do not believe the original borrower will be able to pay them back in a timely fashion. Seems that the provider was correct, as they often are. No matter what, NEVER co-sign a loan!!!
Unfortunately, your friend is screwed. It’s a tough spot to be in when you want to help your kids, but they are responsible for every penny. Plus, student loans never go away even if you file for bankruptcy.
They need to get in sync with their kids and create a plan to pay off the loans. Loan services are willing to work with the student to an extent to have them make payments on an income based repayment plan. Something to look into.
The forum ‘General Discussion’ is closed to new topics and replies.
Articles to help you save money and build wealth, delivered daily.
Sign up now and receive a free PDF with 205 ways to save!