Freedom for Student Loan Cosigners

January 20th, 2012


I have a wonderful tip for people who cosign student loans.

If you call and ask the loan people what they’ll settle for, they’ll offer a reduced principle payoff figure–around 10% off the number on the notices they send you–but they’ll tell you it goes on your credit report. That’s obviously a bad idea. Do not use the words “settle” or “settlement” when you contact the lender, because this is what they’ll try to foist off on you.

Here’s what you want: a cosigner RELEASE. Be sure you use that word.

It’s hard to believe, but it’s true. If you make them an offer they like–and this offer can be way lower than the settlement figure–they’ll execute a total release, and they won’t tell the credit bureaus. Try 50% of the principal and see what happens. You might save thousands. If you cosigned for a someone who has no character and no intention of paying, this may be the best way out.

Check it out, if you’re on the hook because you tried to do some fool a favor. It makes no sense whatsoever, but it works. You pay much less, your credit is unaffected, AND you can tell them to quit calling you and sending you letters. They’ll keep going after the debtor, but you’ll be in the clear.

Hope this helps somebody. It’s not legal advice; it’s just something I happened to learn.

9 Responses to “Freedom for Student Loan Cosigners”

  1. BigFire Says:

    Another tip. NEVER co-sign for a loan. Not for relative, not for friend, NO ONE. If you still want to help them, loan them the money directly. But NEVER assume their risk by co-sign.

  2. Steve H. Says:

    And here’s something you should ask yourself. “If this person can’t get any more money from the government without my help, as incompetent and easily manipulated as the student loan people are, why would I expect them to pay?”
    If the primary borrower can’t get a loan, there is probably a good reason.

  3. blindshooter Says:

    I received a real beating in the late unpleasantness with #2 and stepdaughter. My credit is toast and will be for some time. Good thing is I can live well within my means and can save money for the rainy days without the ball and chains. I guarantee if I live long enough to repair my credit no one will get my name on paper to trash again. Ever.

  4. Steve H. Says:

    Mike, trashy, grasping people are like rats, and while they may get a few precious, shiny pennies to clutch in their greedy little paws, overall, they get a rat’s reward: bitterness and emptiness.
    I guarantee you, the people you and I have had issues with will continue having credit problems and relationship problems for the rest of their lives. Enjoy your freedom!

  5. blindshooter Says:

    I am closer to the decision to live alone.
    I still pray for them to change, that does my soul good.

  6. Steve H. Says:

    I don’t know much about T.D. Jakes, but tonight I happened to see him on TV for a couple of minutes, and he was teaching about forgiveness. He said, “Forgiveness is a gift you give yourself.” It sounds like a platitude, but he’s right. Cut them loose, move on, and get your joy back. It has worked for me.

  7. Chris Says:

    On a related note, I just paid off the last of my student loans last week. This leaves me completely debt-free for the first time in 18 years. This borrower is no longer any lender’s servant.

  8. krm Says:


    Jakes is right.

    You can’t forgive anyone else – that is God’s exclusive domain.

    Your forgiveness of someone does nothing but set you free of whatever happened – although, if the other happens to be repentant, it can be a start toward rebuilding a damaged relationship.

  9. Steve H. Says:

    Sometimes you just have to celebrate dodging a bullet and move on.