Problem:
Our son took out a student loan for pursuing his higher studies. He took out a loan of around $85,000 from Salli Mae, which we co-signed. He was quite studious and doing well in studies. Unfortunately, he had a dreadful accident few months back and has lost all interest in his studies. He is perfectly fine now, but has stopped going to college. Now Salli Mae is making constant collection calls to get back their money. They are threatening to assign the loan to a collection agency. What should we do now? Please help.
Solution:
First of all, I am deeply sorry to hear that your son had a dreadful accident. As a parent, you are indeed passing through a difficult situation. Now getting back to your query, my advice is to have a frank discussion with your son. Ask him how he intends to pay back the student loan. Logically, it is his loan. He has incurred the debt and has to pay it off. But in reality, you are also on the hook for the loan. The problem is you co-signed for a loan that is not even eligible for bankruptcy. This is because government backed student loans don't qualify for bankruptcy except under extreme circumstances. This primarily implies that unless you're unable to earn any money, you'll not be eligible to discharge the debt through bankruptcy.
My advice will be to encourage your son to work out an affordable repayment plan with Sallie Mae as soon as possible. If your son makes any further delay, Sallie Mae may assign the loan for collections. It is essential for him to make the payments, even if you have to give the money. In this way, he will remain connected to the debt. If the situation gets better or worsens, it will be easier for you to manage it.
It is advisable to avoid the collections for various reasons - wage garnishment, late fees, and collection costs. More over, your credit report will show the default till it is paid back. Apart from that your income tax returns may be withheld. To avoid these situations, you should ask your son how much he can pay in reality. After that you should calculate the amount of money you can afford to pay towards the debt. Once you have done that, request your son to contact Sallie Mae as soon as possible. He should positively inform them that he is willing to pay off the debt.
It is better to tell your son straightway that you're helping him out till he gets a job. You can even suggest him to get help of debt resolution services such as debt consolidation for paying off the outstanding balance. Other than that you can also encourage him to work in public service jobs so as to qualify for loan forgiveness program. This program will help him to repay the student loan comfortably.
Finally, financial experts don't recommend parents to co-sign for their children nowadays. It is better to co-sign for a loan only when you can afford to pay back the loan should your child defaults on it. Otherwise, you will get into financial trouble unnecessarily.
Ryan smith is a contributory writer associated with the Debt Consolidation Care Community and has written several articles for various financial websites. He holds his expertise in the Debt industry and has made significant contribution through his various articles.
Article Source: http://EzineArticles.com/?expert=Ryan_M_Smith
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