Q: Dear Valorie,
A few years ago, I decide to make a career change. I looked into several computer technology schools, and found one that guaranteed me a job after completion of training. The school cost $16,000. I took a loan with the bank that the school recommended. The only way I could qualify for the loan was with a co-signer. My father in-law happened to be at my job as I was on the phone with the school and offered to co-sign. Training took longer than the school told me it would. The loan with was not a true student loan, but a personal loan. I got behind on my payments due to having a new bill, and not having more money coming in to offset it. They would not give me a forbearance or deferment
and the loan is now in default. Now my credit is damaged and so is my father in-law's.
The bank has since sold the loan to a collection agency, and they are
going after my father in-law. The agency has offered to settle with me for $12,000, but I can't borrow that kind of money due to my credit situation.
I have a job making more money now, but its not with the school – they
went bankrupt. My relationship with my father in-law has not suffered, but I need to resolve this. He wants to retire in a year or two, and is concerned that he will have to pay it from his own funds. And I need a new car, but with this on my credit, I can't buy one, at least at an interest rate that won’t amount to loan sharking. Do you have any suggestions?
A:
I would do whatever possible to prevent further damage to your credit and your father-in-law's. It is very unfortunate that you lost money with a school that was not stable and did not get the proper information about student loans versus personal loans. It seems you want to do what is right and best, and I think that involves finding an additional stream of income. What kind of part-time work could you do to pay this loan off as quickly as possible? By taking such a step, you will demonstrate to your father-in-law both your integrity and your commitment to uphold the obligation to pay the loan. If your priority is the paying the loan, that goal must come before obtaining another loan to buy a car. I know that it can be frustrating to put something such as a car purchase on hold, but the process will also help you develop the kind of discipline and financial perseverance that will empower you to gain more financial prosperity and freedom in the future. More debt will only dig a deeper financial hole.
Lastly, let your father-in-law know (if you haven't already) how serious you know this is and that you plan to do everything possible to clear the debt and prevent any action from being taken against him.
Best wishes,
Valorie
