There are catastrophic financial consequences when you default on your student loans. You may experience wage garnishments and a lower credit. Your income tax returns may be seized. Collection agencies may start calling you several times a week. It can become more difficult to find an apartment, secure a lease for a car or apply for credit cards. The lender will also request the balance be paid in full, and may add collection charges that can increase the size of the loan. If you had a cosigner for private loans, they may experience the same consequences.
Last year, the New York Times published a story describing how cosigners are affected by defaulted student loans. In the story, the father of a son who defaulted describes how his income tax returns are garnished, and how his credit score has plummeted.
Can A Cosigner Release Get You Off the Hook for Student Loans?
It is important for private student loan borrowers to establish good credit after graduating college or leaving school. Some lenders allow cosigners to be released from repayment obligations after primary borrowers establish a history of making on-time payments. Cosigner release can take 12 months or more depending on the lender.
If you have made steady payments for months or years on student loans and other debts, you can file an application for cosigner release with your lender. This will require you to submit proof of employment, income information and credit reports. Your lender will also look at your income-to-debt ratio while making its decision.
If you have already defaulted and cosigner release is not an option, there may be other ways to reduce your debts. While it is difficult to file for bankruptcy on student loans, it is not impossible.
The Kansas City bankruptcy attorneys at The Sader Law Firm can help struggling borrowers find ways to manage student loan debts.