How can I protect myself, as a co-signer of a student loan, from having my credit hurt?

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How can I protect myself, as a co-signer of a student loan, from having my credit hurt?

Can I remove my name from the student loan? If so, How? I fear that my niece is going to let the student loan go into default and the 1st payment is due in a month.I have asked her repeatedly to fill out the student deferment form, but she keeps procrastinating. She owed an outstanding medical bill of $1,000 to the college that she withdrew from in 3/10. She wants to transfer to UMASS Boston, but they will not give her a student loan, until she pays her medical bill. She just got a job at a retail chain working full-time but she has not saved any money yet for the bill.

Asked on August 24, 2010 under Bankruptcy Law, Massachusetts

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 10 years ago | Contributor

As a practical matter, there is no way to remove yourself from the loan without the loan being paid off--such as by thge neice taking out a new loan to finance or pay the first one off. Technically, the lender *could* allow you off the loan, but they never do--it's against their interest. If they allow you off, they lose one of the people from whom they could seek payment; and since it requires their voluntary consent to release you from the loan, there's no way to force them  to do it.

If your neice defaults, you may have a cause of action against her, to enforce her obligations. You should speak with an attorney to see when and how you could proceed against her at need, though if she is insolvent, you won't be able to get anything from her--and the lender will be able to go after you for the money.


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