Get Out of Debt Guy

I Cosigned for a Student Loan

Posted March 7, 2014

WRAL Reader Question

Dear Steve,

I am being sued as a cosigner of a student loan for $20,000. What are my options with the lender and borrower?

Dianne

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Dear Dianne,

Normally I would not answer a question with so little detail in it but this issue of cosigning needs all the attention it can get.

A cosigner is someone who has voluntarily agreed to accept 100 percent of the liability of a loan without receiving any of the benefit of it. When I put it like that it makes you wonder why anyone would ever cosign. And that's a valid question.

The cosigner is required for the benefit of the lender and borrower, only. The lender has determined the borrower has an insufficient credit history or credit score to be granted the loan so they want someone with better credit to go after in case the borrower does not pay.

I understand your frustration with being sued over this but this problem began when you agreed to be the one liable for the loan.

At this point you can either get the borrower to work with the lender to stop the suit, you can agree to pay the loan to protect your credit, you can hire a local lawyer for legal advice, or you can attempt to negotiate a payment arrangement with the lender.

Here is my rule about cosigning - DON'T DO IT.

Steve

Steve Rhode
WRAL Get Out of Debt Guy

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About this Blog:

Steve Rhode has had careers in opthalmology, real estate and as the head of a nonprofit debt counseling firm. On his blog, he offers hard-won, free advice about getting out of debt, consolidation and making the right choices as you manage your money.