U.S. Markets closed

Sad and broke mom co-signed for student loan

Dr. Don Taylor, Ph.D., CFA, CFP, CASL
Don Taylor

Dear Dr. Don,
My sister co-signed a Sallie Mae student loan for her daughter. Unfortunately, this student did not finish school, apparently is not working, and we don't even know where she is.

My sister's only income is Social Security benefits, and she is nearly bankrupt. She has struggled to make the loan payments each month. Is there any way my poor sister can get out of this mess?

-- Aunt Em

Dear Em,
Depending on the particular loan program, Sallie Mae does offer to release co-signers after one to two years' worth of on-time payments are made, providing that the primary borrower has the income and credit history to justify that release. This isn't likely to help your sister, however, since your niece's location is unknown and she is apparently unemployed. Just how you know she's not working raises a question in my mind if you don't know where she is.

It's extremely difficult to discharge student loan debt in a bankruptcy filing. To do so, the bankruptcy petitioner has to show undue hardship and file a separate motion with the bankruptcy court. If your sister is considering this path, she needs to consult with a bankruptcy attorney.

I suggest your sister contact Sallie Mae to question whether she can get a modified repayment option for the loan. Lower monthly payments are likely to mean higher total costs, but it would probably be better to free up money in her monthly budget to meet her basic living expenses.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the "Ask the Experts" page and select one of these topics: "Financing a home," "Saving and Investing" or "Money." Read more Dr. Don columns for additional personal finance advice.

Bankrate's content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate's Terms of Use.

More From Bankrate.com