Dear Dr. Don,
My sister co-signed a Sallie Mae student loan for her daughter. Unfortunately, this student did not finish school, apparently is not working, and we don't even know where she is.
My sister's only income is Social Security benefits, and she is nearly bankrupt. She has struggled to make the loan payments each month. Is there any way my poor sister can get out of this mess?
-- Aunt Em
Depending on the particular loan program, Sallie Mae does offer to release co-signers after one to two years' worth of on-time payments are made, providing that the primary borrower has the income and credit history to justify that release. This isn't likely to help your sister, however, since your niece's location is unknown and she is apparently unemployed. Just how you know she's not working raises a question in my mind if you don't know where she is.
It's extremely difficult to discharge student loan debt in a bankruptcy filing. To do so, the bankruptcy petitioner has to show undue hardship and file a separate motion with the bankruptcy court. If your sister is considering this path, she needs to consult with a bankruptcy attorney.
I suggest your sister contact Sallie Mae to question whether she can get a modified repayment option for the loan. Lower monthly payments are likely to mean higher total costs, but it would probably be better to free up money in her monthly budget to meet her basic living expenses.
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