My sister co-signed our nephew’s student loans for $ 35,000. When he defaulted, she paid them back. Should her parents reimburse her?


Dear Quentin,

I am the executor of my mother’s estate. I have three siblings. My mother will also share her property between the four of us. There are two problems, however. My mom, a sister of mine and I all co-signed student loans for one of my nephews.

After graduating he got a job and everything was fine. He eventually lost his job and disappeared, leaving all student loans unpaid. He moved, disconnected his phone and did not respond to texts. We were then hunted down by his creditors.

We have all paid off the loans to avoid having problems with our credit scores. My mother drew up her will to deduct the amounts she had paid on behalf of my nephew’s mother before distribution, which will equalize her share.

My sister and brother-in-law are terrible with the money and couldn’t afford to pay it back with their own money.

I paid less than $ 4000, so I’m moving on. However, my sister, who is single and has no pension, had to pay over $ 35,000, and she is out of luck. I asked my mother to compensate her from our other sister’s profits, but my nephew’s mother said it wasn’t his problem.

I don’t agree, but I’m not going to ask my mom to go against her will. My only other thought is to call my defaulted sister and her husband, and ask them to pay my sister $ 35,000 when they receive money from my mother’s will.

By the way, my sister and brother-in-law are terrible with money and couldn’t afford to pay it back with their own money. This has now become a point of contention between the two sisters. What are your thoughts?

Pocket aunt

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Dear aunt,

The easiest solution would be to steal Peter to pay Paul. Your mother deducts $ 35,000 from one sister and redistributes it to the other. To refuse to reimburse this sister after the death of your mother – assuming she dies before her children – would be an act of bad faith. I have no hope that she will, no matter what your sister might say on that call.

According to studies, most people who apply to be released as co-signers of student loans due to unpaid debts on behalf of the student or graduate are turned down. And although lenders tend to advertise a clause whereby they can be released if the student or graduate stays up to date on payments for a certain period of time, they rarely contact the co-signer to remind them.

Another complication, as my colleague Jillian Berman has pointed out: “Many private student loan agreements contain provisions that automatically default on loans if the co-signer files for bankruptcy or dies, even if the borrower makes their payments. on time, according to the Consumer Financial Protection Bureau.

Your story should give pause to anyone who is tempted to co-sign for a family member.

Your story should give pause to anyone who is tempted to co-sign for a family member. Your compassion for your single sister’s predicament is commendable. But she should call your mother and stand up for herself, and also let her nephew’s mother know about her position and want the money to be paid back somehow.

Private student loans require a co-signer if the borrower has a poor or no credit history. It’s like signing a mortgage contract or getting a credit card. Anyone signing a loan deal should, in the worst case, be prepared to pay and say goodbye to that money.

Do I believe that your nephew’s parents will mobilize if they have the $ 35,000? Yes. Are they legally obligated to pay the $ 35,000? No. Are they morally obligated? I’ll let you and your sister answer. What if your nephew’s parents agree to give up part of their inheritance? It’s a bonus.

Whatever your single sister decides to do, she should be open, direct, and unabashed. More behind-the-scenes offers.

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