Question:
Dear Steve,
I currently have private student loans with both SallieMae and Navient. I was putting them into forbearances, but ran into some extreme financial hardship over the last few months and couldn’t make any payments whatsoever. All my loans are now 90 days past due, and my mother is a cosigner.
I recently started grad school, but was only in one class last semester therefore was not eligible for loan deferment. I start school again August 28 and will be a full time student.
I was going to wait until I could submit my grad school deferment form. But both loan companies continue to call my mother and I multiple times a day. And now my brother has tried to apply for the same student loan he has applied to for 3 years with my mom as the cosigner and he is being denied due to a delinquent bill past 90 days, I can only assume it has something to do with my student loan payments as my mother is very diligent about her bills.
I’ve been afraid to call SallieMae and Navient to figure out a solution because they have not been helpful in the past and I know they will ask me for money when I call, and obviously now with only 97 cents to my name I cannot pay them. They tell me my cosigner is responsible. My mom isn’t paying anything and the responsibility is my own.
Should I call Navient and SallieMae and discuss my options?
Should I wait until I start school again? Will I still be eligible for loan deferment? I just don’t even know what to do at all.
Is there something I can do to ensure my brother is able to get his student loan?
If I call them, what would the minimum amount be that I could pay to fix the delinquency and then request grad school deference?
Shara
Answer:
Dear Shara,
Thank you so much for reaching out to me for help.
I’m very confident the issue with your brothers loan is related to the loan status associated with your mother.
The whole idea of cosigning is misinterpreted by many. A cosigner isn’t just doing someone a favor, they are guaranteeing the loan and entirely responsible for the total loan balance. The cosigner is 100% responsible for the amount of the loan and loan performance is reported on the cosigner credit report since it is their debt as well.
Since you loans are 90 days behind and your mother is the cosigner it would make sense that the lender would view your mother as an inadequate cosigner for more loans.
Forbearance and deferment are two names for the same horrible outcome. Not making loan payments doesn’t make this better, it increases the already unaffordable debt. What feels like a payment holiday is only increasing what you will owe on the loans.
Your options at this point are the call the lenders and discuss options, ignore the calls and fall further behind, or decide you are going to default at this point and risk dragging your mother under.
The most logical approach at this point if you want to protect your mother and she is not willing to further damage her credit from these delinquent loans would be for you to consider postponing returning to school right now, get a job, bring your payments current and restore your mothers standing so in the future she could help your brother by cosigning.
Increasing the amount of the default in time will expose you to greater risks like tacked on legal collection costs that can be very high and a risk of you and your mother being sued over the defaulted loans.
If you decide to got back to class and hope to defer your loans, here is what SallieMae has to say about the option:
You’re responsible for the interest that accrues during the deferment period. If you choose not to pay the interest during this time, the Unpaid Interest will be capitalized (added to your Current Principal) as frequently as quarterly and at the end of the deferment period. As a result, more interest may accrue over the life of the loan, the Current Amount Due may be higher, and more payments may be required. We encourage you to consider paying at least the interest as it accrues, which will save you money over the life of the loan.
A final consideration would be to talk this all over with your mother and see if she can help bring these loans current. After all, she’s responsible for them. You might want to suggest to her she get a free copy of her credit reports at AnnualCreditReport.com so she can confirm how these loans are being reported on her credit report.
