Question: This is my first post here. I’ll just explain my situation and hope for any advice you’d be so kind as to offer.

The type of loan I’m concerned about is an Excel through a private company (at the moment, it is Sallie Mae). I’m aware that since part of Sallie Mae is non-profit, if this loan defaults, it will be treated as a defaulted Federal student loan, right?

To start at the beginning, I needed this loan because I lost my financial aid package my sophomore year because my father would not provide his income tax papers to the college financial aid office. This happened after the first semester. Is this kosher? I had already attended a semester having had financial aid. The aid then gets yanked, so I’m left holding the bill for the term I just attended, no longer having the option of whether to attend as a full tuition student. Since I already owed for the past term, I decided to try and find a way to pay for the rest of the year.

My parents and most family did not have the credit to qualify for the loan I needed. I did not qualify for the amount I needed as I was not employed. My father had a former client of his sign for the loan (yes, nightmare, I know) and assured both his client and me that getting the loan was the only problem, paying it would not be. So, I got this loan with my father’s former client as the borrower, I was the student borrower (sometimes called “co-borrower”), and with the understanding that my parents would make the monthly payments. Eventually, we assumed I would take over the payments since the repayment period is 15-20 years. It was about a $30,000 loan.

Well, unfortunately, my father became mentally ill and no longer makes the same amount as he used to and has given up on paying the loan. He and my mother are separated. My mother and I try our best to make the loan payments. We have managed to pay about $20,600.00 back. Only $710.00 has gone to the principal (can that be right??!!??). Are we being bilked?

At the moment, the loan is about 7 months delinquent. There are circumstances causing this I won’t bore you with. I don’t want to default, not only because I don’t want to face those consequences, but I don’t want the woman who signed for the loan to face those consequences. Naturally, she has never made a payment on the loan, as it was for *my* education. She has also, in the past few years, consulted an attorney who told a collection agent for Sallie Mae that I had “fraudulently” obtained the loan.

My only other student loan, a Federal one, is in forbearance at the moment due to Economic Hardship. I’m not sure what to do. I can try resuming the Excel loan payments, but looking at my monthly income, I don’t see how I could ever bring it current. It has been in repayment for over 8 years now. I believe the days of my parents helping pay the loan are long gone.

Sorry to have gone on so long. Any help is immensely appreciated.

Answer: It depends on the repayment terms you selected. There are all kinds of options, including paying just mostly interest in the early years. If that’s what you selected, then very little of the principal was paid. At say 8% the interest alone on $30,000 would be about $2,400 per year. 8 times $2,400 would be about $20,000 interest. If you don’t pay, they will go after her. Her only way out of the debt would be to prove fraud or file bankruptcy. If she proves fraud, you (or maybe dad) might be open to criminal charges. But since she did voluntarily sign the loan papers, establishing fraud might be very difficult – Attorney for the lender: “Didn’t you read what you signed, lady?” If the loan was in your name alone the lender might be unable to collect due to your current financial situation, but since you don’t have the money the lender will most likely go after the co-signer. She wasn’t very smart to co-sign the loan, but now the lender will hold her responsible for it. You probably should collect all the loan papers and talk with an attorney of your own. That attorney will be able to evaluate the situation and point out your options. I suspect that the answer will be that if you can’t pay the loan then it’s the co-signer’s problem.

Related posts:

1. Private Student Loan If You Have Bad Credit?
2. Can my defaulted student loan be bought from the government
3. Can you pay a mortgage with student loan money?
4. A question about a student loan default
5. Student Loan – Bankruptcy
6. Qualifications for Student Loan
7. Student loans the lifetime debt.
8. Student Loan Consolidation Center, San Diego
9. Nelnet, student loan consolidation – anyone have any experience with this
10. Student Loan Default Questions
11. Student Loan Lenders..
12. Question of Student Loan Consolidation