Sabrina Finch decided to become a nurse in 2004, and her mother, Rebecca, co-signed a private student loan for her in 2007. However, Sabrina faced difficulties due to her bipolar disorder and was excused from the loan in May due to disability. The loan was then transferred to Rebecca, who is now 85 and unable to afford the monthly payments of over $31,000. This situation highlights the risks and challenges faced by co-signers of private student loans.
Private student loans have seen significant growth in recent years, with over $130 billion owed by Americans, surpassing other types of debt like medical debt or payday loans. Nearly all private student loans require a co-signer, often due to the thin credit history of the borrower. However, this puts the co-signer at risk if the borrower defaults on the loan, which can have severe financial consequences for both parties involved.
The U.S. Department of Education forgives federal student loans in cases of permanent disability or school fraud, but private lenders rarely offer such relief. Even when they do, the debt is often passed on to the co-signer, as seen in Sabrina’s case. Private student loan holders are aggressive in their collection tactics, resorting to lawsuits, wage garnishment, and property liens to recover funds, causing significant stress and financial strain for borrowers and their co-signers.
Kathleen Cullen, another borrower, attended a for-profit culinary school with the help of her father, who co-signed her loan. The poor quality of education she received left her working as a bartender, struggling to pay off her loan. With a balance nearing $77,000 and a high-interest rate, Cullen’s debt is now more than double what she originally borrowed, putting a strain on her father’s retirement plans. Co-signers of private student loans face additional risks, especially when the borrower attended for-profit schools with questionable outcomes and little financial benefit.
Co-signers like Rebecca and Kathleen’s fathers are trapped in debt cycles due to the lack of options available for borrowers and co-signers seeking relief. Despite efforts to prove school fraud or seek debt cancellation, private lenders like Navient often reject such requests, leaving borrowers and their co-signers in dire financial situations. The stories of Sabrina, Rebecca, and Kathleen underscore the challenges and risks of co-signing private student loans, highlighting the need for better protections and relief options for both borrowers and their co-signers facing financial hardship.
