Just You on the Hook

Debbie took out loans while her daughter finished a bachelor's degree. Debbie doesn't have the money to pay the $40,000 back. If she doesn't pay, what are the ramifications to her daughter?

QUESTION: Debbie in Louisville took out Parent Plus loans and private loans while her daughter finished a bachelor’s degree. Debbie doesn’t have the money to pay the $40,000 back and only makes $25,000 a year. If she doesn’t pay, what are the ramifications to her daughter?

ANSWER: On a Parent Plus loan, you’re the only one who is liable. She’s not liable, I think. If she hasn’t signed on the loan, she’s not liable for the loan. If I borrow money to buy a car and give it to you, you’ve benefited. Who benefits does not make them liable, who borrows is the one who is liable. You are either liable or not, based on who signed the note. Check with an attorney to get a legal opinion, but that’s my understanding of basic business law.

The trick is knowing how you are going to pay $40,000 when you only make $25,000. We are going to have to do something to work on your income. We need to get your income up. Start thinking about what you want to be doing in five years that will pay you $50,000 instead of $25,000. Also look at what barriers there are which keep you from getting that job. Remove those barriers.

For instance, you might need to take a class. You may need to get into a certain program and try to be in a position to make more. Just looking for a job is not the only thing unless you are super qualified for something already. If you are, then looking for a job is the equation. But on the long haul, we definitely have to get your income up for you to be able to address this. It’s very tough to hit that goal making $25,000, as you know.