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Like many parents, when my 18-year-old daughter started going to university in August this year, I co-signed a student loan for her. In October, I found out that she was no longer in class or doing any homework. She moved out of the dormitory and lived with a girlfriend.
Now she has $20,000 in student loan debt and is unemployed. Presumably, she is currently looking for a retail job. When her loan enters the repayment state and she does not pay, I think I will take responsibility.
I am a handicapped person and live on social security. I cannot repay her loan. If it comes down to her not repaying the loan, should I take her to court?
-One.
Dear A.,
Unfortunately, 18-year-olds do not always make the wisest decisions. This is one of the reasons why student loans have become chaotic so quickly. When you are not an adult, it is difficult to fully understand the long-term effects that your decision will not only have on your own financial situation, but also usually affect the finances of others.
I’m afraid you are right, you are responsible for your daughter’s student loan. When you agree to co-sign, you are as responsible for the debt as your daughter. And it is also possible that the lender will find you first. You may not have much income, but you still have more than your daughter.
Since you co-signed, I assume these are private student loans. (Federal student loans usually do not require a co-signer.) This makes this situation even more difficult because private lenders have far more limited options compared to the federal government.
You need to talk to a lawyer who specializes in contract law to determine if you can choose to sue your daughter. However, even if you can take her to court, I don’t think this is the way you should go. Suppose you win the sentence against your daughter. If she doesn’t have money for you to collect it, it’s almost meaningless. At the same time, you still need to pay the lender.
If I were in your situation, I would be angry with your daughter. But in fact, if you start in an angry place, you may not make any progress with your daughter. Let her know how terrible her behavior is to your finances. Tell your daughter that her loan payment may make you unable to afford basic expenses, and her decision may destroy your credit.
Try not to focus on any disappointment you feel about her decision to drop out of school here. The goal here is to get her to help pay. Given that we hear about the shortage of workers every day, if your daughter is really looking, she should be able to find an entry-level position.
You can offer to ask her to move back to you so that she can start to reduce the loan balance of $20,000. This may not appeal to her at first. But I guess if there is no job or income, she will soon lose enthusiasm for her girlfriend.
At the same time, you need to contact the lender and discuss your options. Be prepared to provide documents proving that you have a meager income and a disability. Although private lenders do not need to provide accommodation, they may be willing to do so if you can prove your inability to pay. Getting something is usually better than nothing, especially if they can avoid the time and expense of taking you to court. The Student Loan Borrower Assistance Program of the National Consumer Law Center is a good resource for understanding your options.
If all else fails, I suggest contacting a lawyer to find out if it is possible to discharge the debt. Student loan debt can rarely be forgiven, even in the case of bankruptcy. But in some cases, it is possible if you can prove excessive difficulty, usually due to disability.
You cannot revoke this decision. But all you can do is learn from it. Unless you are able to accept payment, under no circumstances will you be able to co-sign the loan.
Robin Hartill is Penny Hoarder’s certified financial planner and senior writer.Send your tough money questions to [email protected]
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