The Moneyist: My sister co-signed our nephew's $ 35,000 scholar mortgage. When he was late, she paid them off. Ought to his mother and father pay her again?

Dear Quentin,

I am the executor of my mother's estate. I have three siblings. My mother will split her property equally among the four of us. However, there are two problems. My mother, one of my sisters and I signed a student loan together for one of my nephews.

After graduation, he got a job and everything was fine. He eventually lost his job and disappeared, leaving all student loans unpaid. He moved, disconnected his phone, and did not respond to text messages. We were then persecuted by his creditors.

We all paid off the loans to avoid any credit problems. My mother made her will to deduct the amounts she paid from my nephew's mother before the distribution so that her share would be offset.

My sister and brother-in-law are terrible with money and couldn't afford to pay it back with their own money.

I paid less than $ 4,000 so I'm moving on. My sister, who is single and has no pension, had to pay over $ 35,000. I asked my mother to compensate her with our other sister's proceeds, but my nephew's mother said it was not her problem.

I disagree, but I will not ask my mother to act against her will. My only other thought is to call my sister, whose son has defaulted, and her husband and ask them to pay my sister $ 35,000 from my mother's will.

As an aside, my sister and brother-in-law are terrible with money and couldn't afford to pay it back with their own money. This has now become a point of contention between the two sisters. What are your thoughts?

Aunt out of pocket

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Dear Aunt,

My answer is based on your nephew's parents supporting and / or encouraging financial aid from his relatives.

In that case, the easiest solution would be to rob Peter in order to pay Paul. Her mother deducts $ 35,000 from one sister and distributes it to the other. If you refuse to pay compensation to this sister after your mother dies – assuming she dies before her children – it would be an act of bad faith. I have no hope that she will, regardless of what your sister might say about that call.

Studies show that most people who wish to be released as co-signers of student loans because of unpaid debt on behalf of the student or graduate are turned down. And while lenders tend to advertise a clause allowing them to be released if the student or graduate stays up to date for a period of time, they rarely turn to the co-signer to remind them.

Another complication, as outlined by my colleague Jillian Berman: “Many private student loan agreements contain provisions that allow the loans to be automatically defaulted if the co-signer files for bankruptcy or dies, even if the borrower makes their payments on time. according to the Consumer Financial Protection Bureau. "

Your story should give a break to anyone tempted to sign for a family member.

Your story should give a break to anyone tempted to sign for a family member. Your sympathy for your single sister's predicament is commendable. But she should call your mother and stand up for herself and also tell her nephew's mother of her position and her desire to repay the money one way or another.

Private student loans require a co-signer if the borrower has low or no creditworthiness. It's like signing a mortgage contract or taking out a credit card. Anyone who signs a loan agreement should – in the worst case – be ready to pay this money and say goodbye to it.

Do I think your nephew's parents will step on their plate when / when they have the $ 35,000? Yes I do. Are you legally required to pay the $ 35,000? No. Are you morally entitled to repay the money? I'll let you and your sister answer that. Whatever your single sister chooses to do, she should be open, direct, and apologetic.

No more back room deals.

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