Cosigning Student Loans - Learn From My Mistakes - Please Read

[llecs]

Hi Wyvern, welcome to the forums!

I'm speaking with a bit of bias because I went to an expensive school for a couple of years, got kicked out due to grades, and then transferred to a large university and still didn't graduate after 5 years. IMO, other than finding DW, college was a waste of time (well, the parties were fun). As your daughter experiences now, a degree doesn't guarantee a job, or a well-paying job. Despite not graduating, I've owned several businesses, even while in school, and won't hire any new college grad. They lack experience and I don't want to spend $$$ training them only to have them quit and move onto greener pastures. I'd rather hire the non-grad who worked their way into surviving financially because they bring more experience. I say all of this because I think college is a waste for most folks (certain professions aside) and spending $100k+ on education doesn't necessarily provide for a good return on investment.

If I were in your shoes, I wouldn't cosign. When you cosign you are promising that you will repay the entire loan via on-time payments in the event that the borrower cannot. If your daughter can't pay, then you have to pay it off. It'll report on your and her credit reports. If she's late with the payment then you are too. If she defaults, then you do to. If she gets sued, then they'll come after you too. Your status as cosigner isn't released until the loan is paid off. I'm not opposed to cosigning for family for SLs, but I think the underlying issue is the ability to repay. If she were my daughter, I would have her change jobs or professions if needed. $25k is only $12/hr working full-time. I think restructuring the debt won't make the anxiety any less. The debt will still be there. But I also think that she can change career paths and earn double of what she is earning now and that'll take a lot of the stress off and get the loans repaid sooner if that's a goal. I think the ex-DH is looking to get out from under all of this.

[laz98]

Stick to your word, & absolutely do not cosign.  It is NOT your responsibility.  She did have other options; she chose not to take them.  These are the consequences.

[kjel]

Wyvern,

This is an expensive and painful thing your daughter has to learn. I have a 19 year old daughter who is finishing up her second year of college so I definitely understand where you are coming from.

Her first year she went to a pretty expensive private liberal arts college and received a good financial aid package that was heavy on grants/scholarships with about $8K in federal loans. I explained to her that I would not be able to cosign any loans for her due to my own student loan indebtedness and also because I am opposed on principle. I showed her how the student loans accrue and capitalize interest, what repayment options were, and what she would need to earn coming out of school. We dedicated her child support payments to the tuition bill that was not covered by the financial aid package. After the first semester of lackluster performance I told her to shape it up, because it was a lot of money flowing out of my budget to earn those kinds of grades. Second semester was a repeat performance and I told her she had two options: move home and go to the community college, find a job with which she would be repaying me for the Cs and Ds or enlist in the military.

She found a job with my company for the summer and was offered a part time position in the fall. She made the dean's list her first semester at the community college and is on track to do so again. She has repaid me in full and the Pell grant has covered all of her tuition this year so she's only been out of pocket for books. She now has a plan to make payments on the interest for the unsubsidized Stafford loan which will help her in the long run. She is planning to transfer to the nearby state school to finish her undergraduate degree and will have enough saved up to pay for her 3rd year of school.

The AmeriCorps program only provides a deferment period and the earned educational award can be used for current educational expenses at a qualified school OR to repay qualified student loans which are defined as "a loan backed by the federal government under Title IV of the Higher Education Act (except PLUS Loans to parents of students) or under Titles VII or VIII of the Public Health Service Act. You may also use your Segal AmeriCorps Education Award to repay a student loan made to you by a state agency, including state institutions of higher education. Segal AmeriCorps Education Awards cannot be used to repay any other type of loan, even if the loan was obtained for educational purposes. You can use your Segal AmeriCorps Education Award to repay defaulted student loans as long as the loans meet the definition of qualified student loan." Depending on the type of loan(s) your daughter has, the award may or may not be useful-even if it is it's a small drop in the bucket compared to what is owed.

Unfortunately there are no easy answers. As a parent, I totally understand what you are going through. I advise that you do not cosign on her loans period as it will come back to haunt you. What I suggest you do is a hard sit down with her and have a reality check-sometimes you just REALLY have to spell things out for them in a shocking manner. Get together everything that she owes with balances and applicable monthly payments, then put together her monthly expenditures-car, insurance, cell phone, discretionary spending, etc. Some hard choices will have to be made by her as to what she wants to do.


1. She can move home as you have indicated you would provide her a room rent fee and she can eat there too.

2. If she's taking home $350 a week she can pay the $450 a month.

3. She can choose what is a budget priority for her-cell phone, car, nails/hair, hanging out with friends, eating out, etc. Let her choose where her discretionary spending gets cut.

4. Get her to pay something on the loans every time she gets paid. The lenders will generally take something over nothing even if it's below the full payment. A consistent payment is an indication of effort which means the lender will be likely be a little more willing to work with her.

5. If her father wants to be helpful in resolving the debt issues (which I am sure he will be since his credit is being tanked), I'd suggest he gets on board with the tough love plan and after she makes 3 months of payments he can provide a bit of a "match" payment each month, say an extra $50-$100, as long as she's doing her part. You can too as long as it isn't a hardship for you.

Long story short, it's tough love and the sooner she figures it out the better off she will be in the long run. She's young and unecumbered by a spouse or children and can bounce back if she's really invested in the process.

Best of luck.

[TimeToRecover]

Removed my post as the offending post has been removed.

[Bita]

Thank you for sharing your experience. I co-signed for a nephew and although he ignored the problem he created for some time, he eventually stepped up to the plate.  However unknown to me until I dug in to the situation,  he is in debt to the tune of $150,000.  My loan started out at $11,000 and ended up at $18,000.  I have talked to SM staff and I recently found out all his loans were sold to a private lender (collection) and are now consolidated.  They have offered me to pay $10,000 or less to release me from this responsibility.  However, everything I have read advised not to pay a dime or I will be responsible for the entire portion of my loan.  My question on this is if they consolidated and they did tell me my loan is no longer a SM federal loan, therefore, I don't qualify for the pay consecutive payments for some time and it will release me, does this mean I can file bankruptcy since it is now a private lender and I did not authorize this loan to be consolidated.  At this rate, my loan will never if ever be paid off.  M newphew agreed to pay $500 / month and I recently discovered by following up on this that he claimed a hardship due to being between jobs and is now paying $250 temporarily.

[bahbahd]

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Wyvern wrote:

I think, but I'm not sure, that I have decided I won't cosign on what I am currently being asked now. This message board is quite helpful.

My daughter graduated college almost 2 years ago. Her father and I began a divorce proceeding just before she graduated high school. I had always been the money person in the house. The long term plan for the kids education was to send them to the community college for two years then transfer to whatever school they could afford, preferably a state school. We did not save for college. He works at the community college and they would NOT have had to pay tuition for the time at the community college, so books would have been the primary cost for the first 2 years at least. Then they would have incurred loans of less then $25K finishing up at a nearby state school where they could commute.

She really wanted to go to an expensive liberal arts college, and she got a scholarship covering about half the tuition (her SAT verbal was a perfect 800). Her friends from high school were heading to Brown and Yale, and she just didn't want to hear anything about Community. I remember saying to she and her father that she would have to earn at least $45K/year to meet the payments if she went to the private school. They chose not to listen, at the time he viewed everything I said as not being trustworthy, and he said she should follow her dream. I told them I would not be able to help with tuition, or to cosign, or anything that major, but I would help her with books, and keeping a little cash in account she could access, as well as paying round trip airfare for her twice to Europe for 2 semester of abroad study. I also guaranteed her a free room at my house for as long she wanted while she paid down her loans. I currently buy her food, pay her phone bill, and give her a place to live (she is my daughter, I and I love her dearly). I also have been paying the interest on one of her loans that started charging her interest while she was still in school, so I've been paying that for years. Her father chose to cosign all the loans, except the one that his father cosigned for her, and he does not cover any of her current living expenses, nor could he afford to.

Now, 2 years after graduation, her debt has grown from the original $120K she graduated with, to $150K due to capitalized interest. She worked last year in an Americorps program that was supposed to help her begin to make these payments. She kept all her mail going to dad's house all of last year, and I had no idea what was going on with her loans. It turns out she had deferred the loans last year. She finished the Americorps program she was in, in June, spent the summer looking for another job, and finally got work at about $25K/year. Her earnings fall short of what she needs to make all of her payments by about $450/month. The bank holding the largest loans, Wells Fargo, refuses to work with her. The only option they are offering is to consolidate with an ARM which still needs a cosigner. Her father has been declined by the same bank that currently holds the loans for which he is already a cosigner, and they want me to cosign. I am terrified. The new loan would be about $100K of the debt because she has multiple loans. This is for the 4 loans from Wells Fargo. She really wants to pay, but has been unable to get a job that pays enough to cover this.

I feel between a rock and a hard place, I made the decision while she was in school not to cosign any thing, even if it meant she had to switch colleges, which almost happened at one point. Her father enabled her, against my better judgment, and now they want me to cosign $100K in loans. My income reasonably covers my lifestyle, as well as the support I already pay for her, and she is 24 years old. But I cannot afford these loans. She cries all the time, she now takes anti-anxiety medication, she is so stressed by this. She hates her current job, and is resistant to getting a second job, and the need for the medications seem to increase. If I don't sign, it will take her many years to understand why I was 'mean' enough to not help her get the payments under control. She is relatively responsible (meaning she will pay, but hasn't looked a regular 2nd job), but there is no control as to whether or not she will stay employed. I paid for the things I promised when she chose this school, and I am keeping up my promise to support her while she pays down her debt. But I never promised while she was in school to help with the loans.

I am proud of her for graduating with honors and a dual degree (two majors), but she has a baccalaureate, and no hope of being able to go school to get her master's, and jobs are few and far between for a new grad without experience, at this critical time when she needs to establish payments to her loans.

What should I do? If she makes the payments on the new loan, would a cosigner be released after 24 months? being released is not guaranteed? What happens to the loan if the student dies? Does the cosigner owe the money because they weren't released? Do they take 2 cosigners, because I just don't feel it's fair to release my ex-husband when his doting on our daughter is what helped to create this situation, while I had more hard line on it while the debt was being incurred?

Any thoughts are appreciated.

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It sounds like you are talking about private loans or a mixture of private and federal loans. There is a huge difference between private and federal loans - repayment options. Right now it sounds like the private lender is causing the most trouble.

Re: The only option they are offering is to consolidate with an ARM which still needs a cosigner.

This is not an really an "option." She needs clear on what is being consolidated here. Never consolidate federal loans with a private lender as you will loose many repayment, deferment and forbearance options.

What should I do? You should not cosign a darn thing, not on your life. You already made this clear, make it clearer. 

If she makes the payments on the new loan, would a cosigner be released after 24 months? being released is not guaranteed?

Yes, being release is technically an "If and If" a possibility, but ultimately it is Wells Fargo's decision. https://www.wellsfargo.com/help/faqs/studentloans  If 24 consecutive payments are made and If the student meets certain credit requirements. Are you really going go gamble on what your daughter's credit profile/score will be in two years? Or gamble on what Wells Fargo will determine after looking at the remaining loan amount, against her credit and income?

What happens to the loan if the student dies? Does the cosigner owe the money because they weren't released?

Yes, until the bank does release you. Wells Fargo say they will release after student death, but will this policy ever change? How long (many years?) will it take to be released and your credit reports fixed? https://www.wellsfargo.com/help/faqs/studentloans

Do they take 2 cosigners, because I just don't feel it's fair to release my ex-husband when his doting on our daughter is what helped to create this situation, while I had more hard line on it while the debt was being incurred?

I have never heard of a cosigner backing a cosigner for a borrower or a two cosigner situation. You have nailed it on the head right here, cosigning the consolidation releases the current cosigner who helped facilitate this entire situation. DO NOT DO IT!

I am not even sold on why the consolidation is even happening or what loans they are planning to included with the consolidation.  At this point they have come to you for help. Initial disbursement dates, initial loan principal amounts, current outstanding balances, current loan statuses, amount of accrued interest, complete payment histories, etc. Actually I feel like you should already have all of this info if they want you to put your name on $100k worth of debt.

You should have a clear understanding of the entire picture before hand. All this should help you justify your answer of: I love you honey, but no, I cannot and will not cosign a loan consolidation for you.

[sherryb]

I feel your pain.  I am in the same situation with a loan that I cosigned for private sallie mae student loan.  The borrower is my biological son who obtained the loan in his name, as the borrower, for his wife to attend medical school.  Of course, I was assured that he (they) would repay the loan as she would have a high income as a physician.  Of course, she flunked out of medical school.  I am currently estranged from my biological son, at his request.  I have the same language.  My son's loan has the cosigner release language.  It is my understanding that not only do the payments have to be made on time for 24 months,  my son has to request that I be removed as cosigner and he as the borrower has to show financial proof that he can make the payments.  Is this your understanding as well.  

Thank you so much for the post and all your help,

Exhausted and shocked that I allowed someone to take advantage of me..........

[canolve21]

Hi I have the same situation with my niece and his 20.000 loan student. I would like to you if you were able to ride off of your friends debt obligation. Did you submit any paper work or did your friend submit the paper work? What about if the student had never graduate from the school. I have the same problem with the same company. Thanks

[Pat94108]

I just discovered this thread. I know the original post is old but it's helpful regardless.

[k001869]

She can either join the officer corp in the military or become a teacher and have some of her debt forgiven. You have done everythying possible to assist, sounds like because you were the brains of the outfit your now going to be labeled the bad guy. Just help her in every way you can with out going into debt. Shes a big girl now she ahs to figure things out. Again she can join the military or become a teacher.