Can a Cosigner Sue the Primary Borrower on a Student Loan?

#1 Student loan lawyer

Updated on January 23, 2024

Getting approved for a loan can be difficult for people who either have a lower credit score or no credit score. This is especially true of teenagers looking to finance their college education with a private student loan. Your child or loved one will need you to cosign the student loan so they can pay for school.

The problem, of course, is that if they make late payments or miss monthly payments altogether, that negative information doesn’t just get marked on their credit report, but it also gets noted on your credit report as well. Miss enough payments and the lender will demand payment from you. At that point, you, as the cosigner, may want to sue the primary borrower to help repay the student loan. Here’s what you need as a student loan cosigner.

Can a cosigner sue the primary borrower on a student loan?

A cosigner has the right to sue the primary borrower on a student loan to recover the money they spent making the loan payments. So if you don’t make any loan payments, you may not be able to sue the primary borrower to recover money. But if you do pay back some of the student loan debt, then you would be able to sue to try to recover the money you’ve paid.

Most federal student loans don’t require a cosigner. So if you cosigned a student loan, it was most likely for a private loan.

Can I sue to get my name off a loan? You can’t sue to get your name off a loan that you legitimately cosigned — even if your ex spouse was ordered to pay the student loans in a divorce. The lender isn’t required to release you from the loan unless you’ve met the requirements for the cosigner release in the promissory note.

What happens to a cosigner on a defaulted student loan? When a student loan defaults, the lender can go after the primary borrower and the cosigner to recover the money owed. At first, the lender will report negative information to the credit bureaus and contact you both demanding payment. Go long enough without payment, and the lender will eventually sue the cosigner or primary borrower or both to get a judgment. Until the lender gets a judgment, they cannot get a wage garnishment order or put a lien on your home or take money from your bank account.

What happens if you cosign a student loan and the other person doesn’t pay? The lender will go after the co-signer when the person who borrowed the student loans doesn’t pay. It will call you and demand payment. It will contact the credit bureaus and leave negative marks on your credit report. Eventually, if no payments are made, the lender will sue you and the primary borrower if they can find them. A lawsuit is the only way the lender can take money out of your paycheck or bank account.

Can a cosigner take you to court?

If you’re the primary borrower on a debt, your cosigner can take you to court for:

  • Recovery of money paid: they can sue you to recover the money they’ve paid towards the loan.

  • Fraud: they can sue you if you signed their name to the loan without their permission.

  • Breach of contract: if you signed a separate contract with the cosigner, they could sue you to enforce the terms of that second contract.

  • Cross complaint: if the lender sues the cosigner, then the cosigner can file a cross-complaint against you, arguing the lender should get the money from you instead of them.

If the cosigner gets a judgment against you, depending on your state’s laws, they may be able to garnish your wages, put a lien on your home, or levy your bank account. Speak with an attorney near you to get legal advice about your options if you’re sued.

5 Ways to Protect Yourself as a Cosigner

  1. Check credit. Before a lender extends credit on a personal loan, they run a credit check to see if the borrower has good credit, a solid credit history, steady income, etc. It would help if you did the same before cosigning a loan.

  2. Review the loan contract. Read the credit card application or loan contract together, so you both understand what you’re getting into. You want to know the interest rate, repayment options, like deferment or forbearance. You also want to know what will happen in the case of missed payments. Finally, confirm the requirements necessary (usually 12-24 months of on-time payments) to get a cosigner release.

  3. Get collateral. When a borrower defaults on a car loan, the lender can repossess the car because they have a lien on collateral. While you may not be able to get a security interest from the borrower, you can request they give you an item of value. That way, if the borrower fails to pay and the loan defaults, you can sell the item to help repay the debt.

  4. Purchase life insurance. Many student loan cosigners get stuck having to repay the debt after the primary borrower dies. Consider purchasing life insurance to help repay the loan if your family member, loved one, or friend you cosigned the loan for dies before you.

  5. Create your own offramp. Create a contract that requires the borrower to rebuild their credit score and take proactive steps to increase their chances to refinance the cosigned loan into their own name. While this strategy doesn’t guarantee refinancing will be an option, it can help increase the chances of refinancing.

Is the lender coming after you for a student loan you cosigned for? Let's talk

Getting harassed to pay a loan you didn’t borrow for school is frustrating. Why should you be penalized for the borrower failing to uphold their obligations? While your options are limited, I may be able to help get you off of the loan by negotiating a student loan settlement.

Schedule a call with me today. Together, we can discuss your situation, discuss what options you have, and help you decide what’s best for you to get released from this debt.

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