Elderly cosigner of student loans

[ky911sc]

Looking for guidance, I recently discovered my 80 yr old mother had cosigned private student loans for a granddaughter in 2006,07,08, which now total $108k. Granddaughter now has health and financial issues, slow or no pay on loans, so the collections people calling my mother. She is a widow and lives on SS, so there is no money to easily pay. She will soon need to leave her home of 41 years and wants to move to a retirement community. My questions are how to get the collectors off her back ( seems unlikely), how do I protect her home and assets. I don't want the bill collectors to put a lien on her house and prevent the sale. The granddaughter, her husband, and the parents of granddaughter are no use, have their own near bankruptcy, health issues, etc.
Who has any experience in this issue and can give some good suggestions?

[mepstein]

They can't lien the house but they do work very hard to collect. As a consigner, she did enter into a legal and binding agreement to share responsibility for the loan. Best to talk to an attorney to see what her legal rights are in her state.

[stomachmonkey]

You should be calling an attorney tomorrow to see what can be done to move all of her assets out of her name.

[jamesnmlaw]

Look into Income Based Repayment (IBR) offered by the DofE. Keeps things out of default.

[mepstein]

IBR is for federal loans. They dont have cosigners so this is a private loan. No IBR for private loans.
I worked servicing for fed loans and sold private loans for the big lender. But I didnt work collections, they are brutal for private loans.

[sammyg2]

"Co-sign" means she promised to pay the money back in case the granddaughter didn't.
She signed a legal contract saying that.
She is legally obligated to pay it back unless you can prove she was incapacitated and didn't know what she was doing.
My first instinct is that she must fulfill her legal obligation.


It sounds like it was her granddaughter, but not your kid? Does that mean she is your niece? Where are her parents?

Be careful what you do to get out of it or hiding assets, that sort of thing can get you in a lot of trouble if you do it wrong.

[cstreit]

Yep. This is a bad situation. Unless you can prove she was incapable of making the appropriate decisions at that time, you probably are in a tough spot.

Get a lawyer.

[vash]

damn.

[fintstone]

Seems to me that if she cosigned the loans at 70 with sound mind, she is...and should be on the hook for the money.

Not a lawyer, but it seems that if she is wise, she will catch up the payments so that they cannot come after her assets (if they are significant). Maybe granddaughter will eventually assume responsibility. If she is 80, she could pay on the loans for the rest of her life and still likely come out better than losing her home (assuming the payments are relatively low).

If she files for bankruptcy, most states have some sort of exemption for a primary residence. That might be a longer term solution.

[Shadetree930]

And for those of you that may have co-signed for your kids student loans .... get life insurance (enough to cover the loans) on them so that you don't have to cover the debt in the event of their death.

Very cheap for kids that age and keeps a very bad situation from becoming even worse.

[matthewb0051]

Originally Posted by cstreit

Yep. This is a bad situation. Unless you can prove she was incapable of making the appropriate decisions at that time, you probably are in a tough spot.

Get a lawyer.

+1

I'm not sure where you are but look at your State's Bar web site. Due to her age, you may be able to get some really good pro bono work on this. Law Schools and their legal clinics are also a good place to get help.

But above all, get a lawyer. Also ensure that the lawyer knows this area.

[mepstein]

If she has $108K total, the monthly payment isnt cheap. It probably has a 15 year repayment schedule, and possibly 10% interest. That might equal $200-250K +++ by the time the loan is paid off.
Many companies will forgive a loan if the primary dies. But thats not usually in writing. Its an unwritten rule that must be requested.
These loans are like a credit card. I think the term is non collateralized. Its not really possible to go after assets but the collections are ruthless. When the primary company writes of a loan, its sold to an even harsher collection company for repayment. Private loans are not like federal loans. There is no loan forgiveness.

[wdfifteen]

See a lawyer. The are options, from reducing payments to bankruptcy, but the one thing lenders won't tolerate is being ignored by someone who owes them money.

[Shadetree930]

Originally Posted by mepstein

Fake News ... Many companies will forgive a loan if the primary dies. But thats not usually in writing. Its an unwritten rule that must be requested.

Real News ... There is no loan forgiveness.

FTFY

Most student load co-signers (commercial) are finding that there is zero forgiveness. Worse yet, these loans may be called immediately.

Private Loans
With private student loans, the answer is more complex, but generally lenders will not forgive loans after death. It’s common for private student loans to require a co-signer, often the student’s parent. In most cases, banks expect co-signers to assume responsibility for the loan after a death. There are exceptions: Sallie Mae’s “Smart Option Student Loan,” launched in 2009, forgives loans when students die. But generally, banks will attempt to collect payment from the deceased’s estate, and then turn to co-signers.
Private lenders sometimes grant exceptions to surviving co-signers on a case-by-case basis, but there is no legal requirement that they even consider loan forgiveness. In fact, co-signers may be required to repay the full balance of the loan immediately, and have fewer options for consolidating or reworking loan repayment terms.

[jhynesrockmtn]

There was a big segment on NPR on this a month or so ago. It's become a huge issue for seniors on fixed incomes. My understanding is these do not go away through bankruptcy or otherwise. I didn't hear the whole interview but it is becoming enough of an issue nationwide for them to focus some time on it.

[Rikao4]

many things go puff after a bankruptcy..
student loans are not among them..
as this was specifically written into the contract by the lenders....
ah ...the little details..
Grandma meant well...
the kids simply don't care..
not their problem..
and not the collection dept either..
but someone is paying..

Rika

[stomachmonkey]

One wonders if the GD was under the impression that once GM kicked she'd (GD) be off the hook which is why she went there?

[Rikao4]

your bad..
but likely correct..
as someone noted..
that side / part of the tree has issues..

Rika

[Shadetree930]

Originally Posted by stomachmonkey

One wonders if the GD was under the impression that once GM kicked she'd (GD) be off the hook which is why she went there?

Actually she figured wrong if that was her thought process. Upon death of the co-signer, the loan is called immediately.

[sammyg2]

Saw on the news the other day that about half the college students interviewed fully expected their student loans to be forgiven.
That means they can borrow all they want it will magically go away.

The real world doesn't work that way but if you can get someone else on the hook for it .......