Student loan nightmare

Hello,

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.

Thanks for your time,
Isabella

I'm not up on all the different types of loans, nor am I a lawyer, but...

Isabella wrote:
> Hello,
>
> 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?

No, it is a private loan and the government is not involved. If you
default it's between the lender, you, and the co-signer.
>
> 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?

Yes. The FAFSA specifies that you and the parents may be asked to
provide copies of tax returns to support the income reported on the
FAFSA. Fail to provide them and you can't receive aid.

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?

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.
>
> 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.

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?"
>
> 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.

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

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.
>
> Thanks for your time,
> Isabella

--
Steven B. Blank
College Financial Aid Consultants
29 Ives Hill Court
Cheshire, CT 06410
(203)250-7761