Question:
Dear Steve,
It took my son 6 years to get a BA degree. By the 5th year, I ran out of money so I co-signed a private loan for him. For the past 4-5 years, I pay on this loan diligently every month because he refuses to the pay the loan or give me anything towards the payment and I don’t want to jeopardize my credit.
The original loan amt was 34K it is now only down to 29K because the interest rate keeps going up ..now it is at 7.75%. Additionally, he refuses to re-finance the loan
How can I get out from under the responsibility of his debt without jeopardizing my credit?
Sue
Answer:
Dear Sue,
Your son is being kind of a jerk. You helped him finish school and he can at least make some payment, even if he can’t pay it all each month.
Unfortunately, when you cosigned the loan you agreed to be 100% responsible for the loan. There is nothing good in cosigning if you are the one signing. My universal law of cosigning is don’t do it.
If you don’t want to ding your credit then you either need to pay the loan off in full or keep making at least the minimum monthly payment.
If you wanted to remove your liability for the debt you can do that but it will have a credit impact. Some of those options include filing bankruptcy or paying less than you owe on the balance as a settlement. However, you will need to go delinquent to settle it and the balance forgiven may be reported as a bad debt and be taxable.
The only way to make this situation different without harming your credit or costing you a big chunk of change would be to go back in time to the minute before you cosigned for him.
*******
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994.
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ReplyDeleteSteve Rhode, the Get Out of Debt Guy, offers invaluable advice for those grappling with the burden of cosigning student loans. His guidance is practical and empathetic, acknowledging the complexities of navigating financial obligations tied to education. Through his expertise, readers gain insights into potential solutions, whether through renegotiating terms, exploring loan forgiveness programs, or understanding the implications of default. Rhode's approach balances empathy with a firm commitment to empowering individuals to take control of their financial futures. His advice serves as a beacon of hope for those seeking relief from the weight of student loan debt, offering actionable steps toward financial freedom.
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