Defaulting with co-signer
Posted by Senior-Software2130@reddit | studentloandefaulters | View on Reddit | 18 comments
Hi all- i am posting on here again cause i am trying to understand everything I can about defaulting.
I have seen many different stories on reddit about defaulting both with and without co-signers. What would happen should I default with a co-signer? is settlement still an option? I have seen stories on here from co-signers themselves who have said both that they have been held liable and been sued and other co-signers who said that the person they co-signed for defaulted and nothing happened to there credit or anything and the original borrower was able to settle.
Be kind please, i have been freaking out so much trying to wrap my head around everything.
Yes i know what co-signing means, just asking a broad question, thank u!
jonsonmac@reddit
It’s risky, but I’ve done it. The co-signer will be equally liable for the debt, and their credit will also be affected. In my circumstance, I settled for about 30% of the balance shortly after they charged off. However, I feel like they used resources to see that I just went through bankruptcy and my co-signer wasn’t working. So maybe that’s why they accepted my settlement offer.
Your balance is pretty high, so if your co-signer has a good income, they might be more compelled to sue.
Ordinary-Milk3060@reddit
I might have to do this. My co-signers are retired and living off pension and I affectively have 0 taxable income. So, I get the feeling theyd probably be more willing to settle with me.
marwestam22@reddit
I’m also in the process of defaulting on my private loans. I have 5 and 1 has a co-signer. From everything I have read, the co-signer will absolutely be affected. For me, I am continuing to pay on the 1 loan my dad co-signed and hope to pay off more quickly with the extra fund I’ll have available from the others in no longer paying on. How many loans do you have? Are they all co-signed? What’s the co-signers situation? Is their credit important to them? Their credit will be affected, I have not heard of a situation where a co-signer would not be affected.
Senior-Software2130@reddit (OP)
i have two private loans, and i’m in the middle of freaking out about them right now so i don’t even want to bring myself to type it out but just know it’s a lot. i am not done with school yet, and i have applied to a program that would pay for the rest of my school followed by a 3 year long work commitment- so hopefully they would be the last priv loans i take out. My parents (mom and step parent) make a good amount of money hence why i did not receive federal aid but money is extremely strapped for them right now as they are essentially living paycheck to paycheck (5 kids total, a house, car payments, mortgage etc)
marwestam22@reddit
Can you share what amount you’re at currently? It sounds like you are making a smart move to get the rest of your school paid for. You’re already ahead, thinking about how you’ll handle the loans after school too. If you have a good plan of attack once you’re out of school, you’ll be ok. Don’t stress too much now. There are many options for you once you graduate. With most, you can release co-signers with on time payments for 1-2 years, I’ve also heard of many who get out other loans to remove co-signers, etc. Live below your means post college for a few years and put all you can to the loans. But, to answer your question, co-signers will be held responsible if you don’t pay.
Senior-Software2130@reddit (OP)
I am at about $100k priv (ik), i am looking into defaulting because i dont know what to do. this has been eating me alive. ive had panic attacks, ive had to begin going to psychiatrists, its taken a huge toll on my mental health. idk what else to do and im horrified
marwestam22@reddit
I definitely understand the burden of the loans. I’m 15 years out of college and just now deciding to default. The unfortunate reality of private loans is many seem to last 30+ years, so this may be a process for you to plan out over several years. If this is the decision you’ve made, there is benefit of doing this earlier on, versus later in life. This will allow you to rebuild by your 30’s to then make any major purchases like a home. First, have you talked with your parents about this at all to understand their thoughts on how it would affect them, if any? I personally would speak to the company on what is needed to remove a co-signer. Understand every little detail. Let’s say, it’s on-time payments for 24 months. I’d first work with them to arrange the lowest payments you can make for that time and come up with a solid plan to make sure you make those payments for 24 months to remove your co-signers. Then make sure you have a reliable car and housing secured, and a few small credit cards to utilize strictly to build your credit during the default process. Understand your states SOL. Once these items are in place, then start the default process which could take a few years. Simply ignore them, all threats, until you get a notification they are pursuing legal action, which could take several years. If that ever happens, that is when you would negotiate a settlement, likely a lump sum. So it is wise to set money aside over time. If litigation never happens, simply wait until your SOL passes and you’re clear. It wouldn’t hurt to speak to an attorney that handles this to dot your i’s and cross your t’s. Overall, there are solutions and ways out of it that won’t affect your parents. So don’t stress too much!
Ordinary-Milk3060@reddit
I live abroad and am now in the process of trying to get my parents off my loans so that I can just default. Im never coming back and have gotten to the point where the loans are having an adverse affect on my ability to save for retirement. Im going to sell my collections back home and if it still seems like I can't get out from under them... well thats the last money theyll see from me and I wish them luck.
LaurenAMcGuire@reddit
If I may ask, as someone who also lives abroad and will never return to the US, how are you managing to get your co-signer removed?
Ordinary-Milk3060@reddit
Just as an update. My IDR being 0 dollars is actually a much bigger wrench in getting them removed than being abroad. Because, they are calculating my federal loan at 1% of its values which makes my DTI too high. Even though my actualy paymetns are well under 50% DTI
Ordinary-Milk3060@reddit
The only rules for removing my co-signers is that I have made payments for consecutive months and make enough money to pay the loans. That's all I need, my being abroad is immaterial since I have been paying my loans from abroad for 10 years so far.
Senior-Software2130@reddit (OP)
thank you for such a well explained comment. i have been so stressed lately and it’s freaking me out. I use to just be having fun and doing well in school, now i can barely make it through a day without freaking out. it makes me feel so stupid having taken out these loans and it makes me so so sad to think that the rest of my life could be ruined- ur comment made me feel a bit more at ease. it gave me a guideline to try my best and follow- thank u!
marwestam22@reddit
Happy to help. Don’t let this have too much control over you, especially now while you’re in school. Your life won’t be ruined. If you go through the process right as you graduate, and have a plan of attack in place, you can be in a great place come 30, which is still very early on in life! You’ll be ok, best of luck!
marwestam22@reddit
Just to add, I’ve also seen many pay off this amount too in just a few years. If you’ll be making a good income, have the option to live at home, etc. it is absolutely possible to pay it off in 3-5 years too, without affecting you or your parents credit. If you’re able to get a job now and reduce school load any, that is also an option to start paying towards them now. Continue to research the valuable information here and put a plan in place either way. You’ll absolutely be ok!
RiverParty442@reddit
You're better off refinancing so you don't screw over your cosigner
RiverParty442@reddit
You're better off refinancing so you don't screw over your cosigner
marwestam22@reddit
Can you share what amount you’re at currently? It sounds like you are making a smart move to get the rest of your school paid for. You’re already ahead, thinking about how you’ll handle the loans after school too. If you have a good plan of attack once you’re out of school, you’ll be ok. Don’t stress too much now. There are many options for you once you graduate. With most, you can release co-signers with on time payments for 1-2 years, I’ve also heard of many who get out other loans to remove co-signers, etc. Live below your means post college for a few years and put all you can to the loans. But, to answer your question, co-signers will be held responsible if you don’t pay.
LisaInSF@reddit
Everyone’s situation is different. The outcome may depend on the amount owed, the lender, whether the loan is sold (once or multiple times), whether a third-party debt collector gets involved, the state where you live or where a lawsuit may be filed, etc. There are a lot of variables… Just save as much as possible in anticipation of being able to settle the debt at some point.