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Student loan default impact on co-signer

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My 80 yr old dad co-signed about $50k of student loans for my niece. She graduated and got a job but says she can't repay. My parents get soc security and have some retirement income from my dad's job. they no way have or will have the money to repay this loan if my niece defaults. What happens?




Dear SoapLady, In 1988, I cosigned a law loan with Sallie Mae of $12,500 for a person on my faculty. (big mistake) I never paid anything on the loan and she paid as little as possible, with the result that in June of 2008, the loan was about to go into default at $17,000. At that point Sallie Mae agreed to accept $9,500 from me to settle the account. I have a letter from the debt collection agency confirming this fact and Sallie Mae also has a record of my June 2008 payment.
However, Sallie Mae never closed the account (I found this out by chance from a form mailing.) After two months of my nagging them, they finally closed the account in November of 2009. During that time about $1200 of interest had accumulated. I realize I will get stuck with the cancellation of debt as income. And also that I will never get any credit for the $9,500 paid, because it was credited to 2008.
My question is: Why should I pay my tax rate x the $1200 accumulated through Sallie Mae's error? Underpaying taxes is not a solution, nor, unfortunately, is suing Sallie Mae. They made a federal tax error themselves and will not want to admit it. I know this amount is not much in the big scheme of things, but it is the last straw! Could I ask the Feds if they want an amended return for 2008?
Thanks for any ideas,
Suzanne

Sub: #31 posted on Mon, 01/25/2010 - 13:11

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You should have been looking for the interest statement a year ago, not now.

The 1099 should reflect what your settlement letter says.

Sub: #32 posted on Mon, 01/25/2010 - 13:46

SOAPLADY SOAPLADY
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I co-signed a private loan for my daughter with citi bank. She can't find a job and cannot make payments. They sold it to a lawyer. The lawyer has filed a complaint. I am retiring in January 2011. Will they also be able to take my retirement income?

Sub: #33 posted on Thu, 02/11/2010 - 12:55

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It was not sold to an attorney, it was placed with an attorney. Student loans are not sold.
They will not be able to garnish your retirement as long as you keep the courts informed but if you own any property it can be liened.

Sub: #34 posted on Thu, 02/11/2010 - 14:07

SOAPLADY SOAPLADY
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If you cosign, it is YOUR loan. No matter what. Never do it.

Sub: #35 posted on Sat, 02/20/2010 - 10:37

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I co-signed a Sallie Mae loan for my son's girlfriend; she is now in default. She promised to make restitution. Her parents still claim her an a dependent on their IRS and live in Washington State, although our son supports her. Can I pay the loan off and place a lien on her parent's house for the loan balance?


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Sub: #36 posted on Tue, 02/23/2010 - 06:35

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Nope. Her parents took no liability for the loan....you did. They are free and clear.

Why wouldnt her parents cosign? That maybe should have told you a story....

Sub: #37 posted on Tue, 02/23/2010 - 06:39

SOAPLADY SOAPLADY
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How can they "make you pay" if you have minimal/no assets? My son is running into trouble with trying to repay his private student loans, two of which my husband co-signed. My son is currently underemployed (makes barely enough to pay his portion of rent in a shared apartment); he has no assets. My husband and I have less than 10,000 equity in our house and no other assets (two old, high mileage vehicles worth less than 5K). Our income barely meets our expenses now, so we are not able to pay his loans as well. We have tried unsuccessfully to negotiate a longer loan term to lower the payments, but the loan company refuses to help us find a way to pay. It is laughable that they "demand" the entire amount. If all of our assets were sold, it wouldn't even cover half of these loans. Why won't they work with you when you are willing to pay something?

Sub: #38 posted on Wed, 03/10/2010 - 18:53

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This is the nature of private student loans...they do not have to work with you. They are not government backed so their are no plans to pay what you can or income contingent. Plus the agreement you signed in the prom note stated "balance due in full on demand upon default." Make him pay? They will sue and then garnish wages.

Has your son looked at picking up a second job?

Sub: #39 posted on Wed, 03/10/2010 - 19:07

SOAPLADY SOAPLADY
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That is the part I don't understand...what do they sue for when you don't own anything other than a very small amount of clothing? Our assets, I believe, would be exempt because they are so small. I don't know if they follow the same rules as for bankruptcy (which we are considering), but we fall into an exemption category because our income is below the median for our state. What exactly can they "garnish" because we have no disposable income? We can barely buy groceries.

Two jobs doesn't mean much when your bills are very high. My son already works 70hours/week. He wasn't able to finish his degree because he was maxed out on loans so it is hard to find work that pays - in this economy it is hard to find work at all. He was unemployed for a while before finding anything.

Sub: #40 posted on Thu, 03/11/2010 - 05:06

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