In 2004, Sabrina Finch decided to become a nurse and took out a private student loan from Navient in 2007, with her mother, Rebecca, as a co-signer. Sabrina, now 53, lives in Virginia and has faced many challenges over the years, including falling behind on her bills due to her bipolar disorder. After proving that her disability prevented her from working, Navient transferred the loan to her mother, who is now 85 and unable to afford the monthly payments. Rebecca’s only income is her Social Security benefit, and they fear that the lender may take her house to settle the outstanding debt, which is over $31,000.
The private student loan industry has grown significantly over the years, with Americans owing more in private student loans than in past-due medical debt or payday loans. Co-signers are often required for private student loans, as student borrowers typically have a limited credit history. However, there are many financial risks and few safeguards for co-signers, who may end up being responsible for the debt if the borrower is unable to pay. Nearly half of borrowers aged 50 and up who co-sign on a private student loan end up making payments themselves, leading to an inter-generational financial problem.
Private student loan forgiveness is rare, with only about half of lenders discharging the debt in cases of permanent disability or death of the primary borrower. Borrowers and co-signers are often left facing aggressive collection tactics from lenders, including lawsuits, wage garnishment, and frozen bank accounts. It is extremely difficult to be released from the loan as a co-signer, with very few successful applications for co-signer release reported by private student lenders. Borrowers and co-signers are often trapped in debt, with little recourse for relief.
Kathleen Cullen took out a private student loan with Navient to attend a for-profit cooking school in Manhattan, with her father as a co-signer. However, the education she received fell short of expectations, leaving her with a degree she considers worthless. Despite her low income as a bartender, she struggles to meet her monthly loan payments, putting strain on her relationship with her father, who is worried about his retirement savings. Navient may contact both the borrower and co-signer when the account is delinquent, leading to further stress for both parties.
Many co-signers who have taken out loans for students attending for-profit schools face additional risks, as these institutions often have poor outcomes for students, leaving them struggling financially. Despite attempts to prove school misconduct and seek debt cancellation, borrowers and co-signers often face denials from lenders, leaving them trapped in debt. The process to release co-signers from the debt is complex and challenging, with few options for relief available. The financial burden of private student loans can have lasting consequences for both borrowers and their co-signers, affecting their financial stability and future plans.
