I thought it was a federal loan because I believe they did both types of loans. I started paying back the $153,000 interest-only loan in September 2022, while my dad paid towards the principal and the balance increased. They removed the interest-only repayments after several calls were made regarding the balance not being reduced.
My dad is trying to buy a new house, and Sallie Mae will not take him off the loan even though they said he only had to remain as the cosigner for the first 12 months after I had to start making payments. Sallie Mae never gave us any documentation stating this. This student loan is preventing him from acquiring a mortgage loan. What are our and his options?
Former Student and Worried Son
Also see: My sister owns properties in Hawaii, yet refuses to make a will. If she dies, will our half-sibling inherit anything?
“You don’t want to be in a situation where you are in default, and your dad has to bail you out, or you are in default and you no longer have him as cosigner.”
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Dear Former Student,
Unfortunately, the one thing Sallie Mae
SLM,
-0.48%
won’t take into account when deciding whether to remove your father as a cosigner on your student loan is his desire to take out a mortgage.
Borrowers who default on their student-loan debt can face years of harsh penalties: They could have deductions on their tax refunds, and even have their Social Security benefits and wages garnished to repay the student loan. The Consumer Financial Protection Bureau has a guide for cosigners, and also points to research that says at least a quarter of cosigners end up making at least one student-loan repayment. Why am I telling you all of this? Because lenders will take a cosigner off the loan when all its conditions have been met.
Cosigning a student loan comes with risks. Anyone can end up in the red after failing to repay a student loan — and there’s no reason to believe it’s not somebody’s child or parent. In fact, one-third of the defaulted student loans are held by borrowers who are aged at least 50, even though older borrowers make up around 20% of federal student loan borrowers, according to recent data. Only 10% of cosigner release applications are approved, the CFPB found in another study, so your father is not alone in his quest to have himself removed.
I reached out to Sallie Mae about your letter, as a courtesy and to see if they could provide further insight, and a spokesman told me that it only offers private student loans and provides multiple disclosures to customers stating that during the application process. It also cited its policy related to cosigner release, which states that “you can apply to release your cosigner from an open and active loan after you graduate or complete your certificate,