Deadbeat Daughter-in-Law Reneges on Co-Signed Loan

Dear Debt Adviser,

My daughter-in-law (I hope my soon ex-daughter-in-law) asked us to co-sign a Sallie Mae student loan for a trade school. My husband agreed to sign and to make the payments while she was in school and for two months after, so she had time to find a job. She graduated and has never made a single payment. She has some income -- can we sue her to recover the loan money? Needless to say, we feel very used, lied to and defrauded.

-- Dianne

Dear Dianne,

Ah, the familial co-signing blues. It is a regrettable fact of life that sometimes "no good deed goes unpunished." As you now know, co-signing a loan for a friend, family member or loved one can at first seem like a good idea, but once you get past the emotion of wanting to help someone, the dark underbelly of lending -- the potential consequences of default -- becomes more obvious. Unfortunately, many people don't look past wanting to help and miss the often serious potential consequences.

At this point, I feel compelled to point out a positive in your particular co-signing situation. From your letter it sounds more like you are disappointed in your daughter-in-law's reluctance to pay her debt, in addition to other issues, but that you and your husband can afford to pay the loan for her. Many people who co-sign loans for those who don't pay are not as fortunate, and the unpaid loan ends up causing them financial problems and damaging credit histories.

So, keeping in mind the fact that thankfully you are not in a financial hardship, let's explore your options for dealing with your daughter-in-law and your financial obligation from co-signing the loan.

If there is a chance that your son's marriage may be heading for the rocks, I suggest that you not add any stress to the relationship at this point. Before you know it, your demands may well be cast as the final straw that wrecked their relationship when it might otherwise have been saved. So, while it may be possible to sue your daughter-in-law to recover the cost of her Sallie Mae loan, I would recommend you hold off pushing this particular button until they decide the fate of their marriage.

You can always seek the advice of an attorney to explore that avenue as a part of any divorce settlement, and then only after giving it considerable thought. This is your son's wife and possibly the mother of your grandchildren. I would suggest you weigh the cost of possibly alienating one or both of them by suing to recover the money against the cost of the loan. Only you can decide which option is the higher price to pay.

If there is any communication between you and your daughter-in-law, now might be a good time to reinforce it. You might consider reaching out to her and bringing up the co-signing of the loan. Ask her when she will be able to take over making the payments on her student loan. It could be that she has assumed that you are fine with making the payments for her. Or she may not remember the stipulation that you would only be making payments for two months after she graduated. If you give her the benefit of the doubt and approach her in a nonconfrontational way, you might get what you want. That won't cost anything to try, right?

Good luck!

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