Dear Penny: Are we stuck with my stepdaughter’s illegal student loan? | pennyhoarder
My husband’s daughter, from his previous marriage, took out a student loan in her name without her consent. We paid off the loan. Our relationship with her is non-existent.
He recently became disabled, so our monthly income has dropped significantly. Is there a way to repay the loan? We tried several times to contact her daughter without a response. We are reluctant to renegotiate the refund because we do not agree that it is really up to us to reimburse.
We asked our duty officer and the Ministry of Education for additional information and to voice our concerns, but there was no response. What options do we have besides repaying the loan?
When your daughter-in-law took out this loan without your husband’s permission, she likely had to use her social security number and sign her name. It is identity theft.
Unfortunately, there is no easy solution to this terrible situation that your stepdaughter has forced on you both. If she stole your husband’s identity to get this loan, he could file a police report and then submit a copy to the duty officer.
Of course, most parents are reluctant to take action that could result in criminal charges against a child, even if they are separated. If your husband is unwilling to report the incident, he will have no choice but to make these payments to keep his credit intact.
Your daughter-in-law has shown no interest in accepting responsibility for her actions, so I think pursuing criminal charges deserves serious consideration. Or if he’s not sure, your husband might text his daughter to let her know he’s filing a police report if he doesn’t hear from her within a certain time frame. Maybe knowing that the authorities might come knocking on the door will give her the motivation she needs to start righting this wrong.
But as long as you pay the loan without reporting it, that debt is yours. You should do everything possible to keep payments as manageable as possible.
With private loans, you are at the mercy of the lender when it comes to repayment options. If your daughter-in-law has taken out federal loans, such as Parent PLUS loans, on behalf of your husband, the flexibility is much greater.
Your husband could get some breathing space by taking advantage of the federal moratorium on student loans which is in effect until January 31, 2022. Not only can you skip payments without accumulating interest or late fees, you can request a refund of any payment you have made. I have been doing since March 2020. Obviously this is only a temporary fix, but that pause coupled with refunds of up to a year and a half of payments might provide some relief.
If there is still no solution in sight, an income-based repayment plan might be an option. Payments are capped at 20% of discretionary income. Any balance remaining after 25 years is written off, although the amount canceled is usually treated as taxable income.
You did not say whether your husband’s disability is permanent. If so, and it’s a federal student loan, it could be one of more than 485,000 people who recently became eligible for automatic student loan forgiveness. The Department of Education is notifying those who qualify for automatic release until the end of the year, although some people will need to apply for debt cancellation.
As the two of you figure out your course of action, I would suggest that your husband be vigilant in monitoring his credit reports. Her daughter clearly has the necessary information to secure funding in her name. He should consider a credit freeze, which essentially locks down access to your credit report. This ensures that someone else cannot apply for credit on your behalf.
The ideal solution here would be for your daughter-in-law to take responsibility so that you don’t have to involve law enforcement or pay off that debt. It is she who makes this impossible.
This is a situation where your husband may have to choose the less terrible option. And even if you are impacted, it is ultimately his decision to make. It’s infuriating that I just spent the above paragraphs suggesting ways for your husband to pay off a loan he never took out. But unless he wants to treat it like a crime, I’m afraid the only solution is to ease the pain.
Robin Hartill is a Certified Financial Planner and Senior Writer at The Penny Hoarder. Send your sensitive money questions to [email protected].
This was originally posted on The Penny Hoarder, a personal finance website that empowers millions of readers nationwide to make smart decisions with their money through practical and inspiring advice, as well as to resources on how to earn, save and manage money.