Question: My mother co-signed my sister's student loan on her online school, but life got when it comes to my sister these types of her mental health (she is now considered totally disabled) she was not able to make her payments. Then the student loan company kind of changed the student loan to create my mother the main owner of your debt, and my sister isn't even around the student loan anymore.
My father passed away not too long ago and my mother received some money from his life insurance, but it wasn't much. It saddens me the only income he's left is taken with a education loan company. Is there any advice I'm able to offer her to provide her a glimmer of hope? I emailed an attorney who said there was very little to do as she was the co-signer and was accountable for it. I find it appalling that there is no protection on her as my mum doesn't speak English and she or he may not have been informed of the details of the borrowed funds as everything was in English.
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To respond: Unfortunately, while your mother agreed to co-sign the initial loan, she decided to legally repay it in case her daughter couldn't. “If co-signers are can not meet their student debt bill every month, they merely possess the possibilities in the private lender,” says Anna Helhoski, education loan expert at NerdWallet. Having said that, “some private lenders promise to release the debt when the primary borrower becomes totally and permanently disabled,” says Andrew Pentis, licensed student loan counselor and higher education finance expert at Education loan Hero. But other private lenders are only able to do that, for example, if the main borrower dies.
So what should your mother do now? If she can't make payments, the professionals say you need to speak to your student lender to negotiate new payment terms or temporarily reduce payments. “Otherwise, the only real other available choices may be to try and settle your debt with the lender or pursue private student loan discharge through bankruptcy, which can be difficult and dear,” says Helhoski.
But don't despair, because i am not saying your mother is without options. “If she's a limited income, it may be wise on her to set up a debt plan having a nonprofit credit counseling agency. That way, she and her credit counselor could set up a loan repayment over 3 to 5 years, perhaps in a reduced rate of interest, and her counselor could mediate,” says Pentis. The National Foundation for Consumer credit counseling (NFCC) and also the Financial Counseling Association of America (FCAA) both offer national resources for nonprofit consumer credit counseling.
Even before committing to such a plan, your mom can probably get a free consultation from an NFCC-accredited nonprofit. For instance, “at GreenPath [a financial wellness nonprofit], you can speak with a student loan counselor about all of your options and build a customized plan, all without having to open your wallet. If a more drastic strategy like your bankruptcy filing as a way to remove the debt is needed, the advisor can offer a recommendation,” says Pentis.
Another option, in case your mom is able to obtain a co-signer for that loan (she may require one), is always to refinance the loan in a lower rate with another private lender. “She could extend the word from the loan to keep her monthly obligations low, even though it would boost the overall cost of the loan because of accrued interest. The refinance eligibility criteria are pretty rigid, so that your mom or the co-signer would want strong credit to create up for that limited cash flow,” says Pentis.