Published October 22, 2012
Dear Dr. Don,
I co-signed on a friend's law school loan. She graduated and couldn't find a job, so I have made the payments for more than three years -- paying down the balance by 65%. She now has a job but will not make the payments. The loan was sold several months ago, and the company now holding the loan says it does not send statements or updates to co-signers. So, in effect, I am the co-signer on a loan that I can't even get paperwork on. Is this legal? What should I do to at least get statements, so my credit isn't at risk?
Thank you so much,
The lenders aren't required to share information with co-signers, but the smart ones do. After all, you're the one who's been making payments on the loan for the past three years. That said, co-signer rights can vary by state, so you should check with the office of your state's attorney general to ask what rights co-signers have where you live.
I'd normally tell you to ask the lender to notify you when the primary borrower misses a payment, but you say she's never made a payment, so you shouldn't need notification. Instead, I'd ask the lender if you could set up payments as an automatic debit to your bank account. That should get the lender's attention.
I know that sounds like a pessimistic step to take, but if she hasn't paid in three years and is not paying now, even though she's working, what are the odds that she's going to start being responsible?
When I hear from readers like you about the limb you went out on to support a friend, I find it hard to ever recommend a person co-sign for someone who isn't a family member. Putting your credit history and income at risk to become a pal's co-signer sounds like the definition of friendship, but it's a hard lesson to learn that the friendship was a one-way street. I get parents and grandparents writing in, regretting that they took this step for their children and grandchildren -- and those were relatives.
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