Debt Collection on a Private Student Loan

by Steve
(Monroe, GA)

My wife and I cosigned on a student loan for my son and it has went into default.

It has been turned over to a collection agency.

My son cannot pay it, 6 months ago he filed for bankruptcy. So, in turn they are coming to us for the collection.

They have agreed over the phone to settle for 70% of the amount due...a little over $13,000.

Should I have a letter come from them showing me exactly what I am paying? They sent me to a website showing my sons information and the settlement amount.

What kind of wording should I use to ensure the account has been paid in full without recourse in the future?

Finally, before I send a bank draft check, should there be a statement on the back of the check stating the same information from the last paragraph?

Comments for Debt Collection on a Private Student Loan

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Jan 08, 2010
Settlement Letter
by: Gerri


I am sorry to hear you ended up stuck with this student loan debt you cosigned. You are smart to make sure you get an agreement in writing before you pay. Ask for a letter, signed and on letterhead, stating the terms of the settlement - including the fact that if you make the agreed upon payment, the balance will be zero. As long as the language on the letter is clear then you should be OK. Make sure you get this letter in hand before you send the check.

I believe the letter, along with a copy of your canceled check, should be sufficient.

Forgiven debt is typically considered taxable income (not for debts discharged in bankruptcy though). Since you are a cosigner and not the original debtor, I am not sure whether you could end up getting a 1099, but it would be a good idea to check. If so, you'll need advice from a tax professional.

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