My husband found his Mom co-signed student loans for his nephew. Can they make her pay?

Toni - what a sticky mess. Student loan in general is not dischargeable debt. You need to review the paperwork to see just what kind of loan it was and who the lender is. Stafford & PLUS you have till they are paid off and those can place a lien on income. I would be somewhat concerned that there could have been improprieties done with the student-loan application. For several years now, all governmental student FA has had to have a FAFSA done and anyone providing income assistance would have to participated their info to FAFSA. College FA requires "financial awareness counseling session" done by the persons taking on the debt as well. So could your MIL have been able to do either of these on-line ? We are going through all this as we have a HS senior going off to college, the on-line counseling sessions have to be done in order for funds to be released & you get a confirmation of it as does the college or university. FAFSA has all sorts of penalties in filing improperly too and they dovetail with IRS & state tax on all this as well. Now private loans are a whole other issue, I'm not familiar with those as we're not doing any; we looked into them and they have all sorts of issues…like usually do not offer any forbearance, deferment & have prepayment penalties & a variable interest rate (yikes!). I would look hard at the paperwork and when done to see if perhaps grannie did not do them or was not cognitive enough to do so. Could the nephew pay back his student loans? is he still in school and doing ok? or is he out and working and paying back his loan as required?

But the student loan is just part of all this, now isn't it? My suggestion is for your to help hubby in sorting out the morass that is his mom's situation. Being organized in all this is really important & you can do this! He probably is overwhelmed in all this and mom knows how to get to him.

Get a couple of binders going on her: financial, medical and legal. Get a box of those clear insert sheets to put in documents (rather than 3 hole punching them in) Then go through all you can find as to the last 3 years on her and then anything long term problematic like the student loan & funds loaned to BIL that is out there. You need to find her "awards" letters from SS and any retirements too. Then you do a projections on her costs of care and when her house-sale $ will run down, I mention 3 years because it seems that if they have been in IL, AL or board & care home situations and then need a NH, the look back is somewhat shorter as their funds have been paying for care (at IL, etc). For my mom - who was in IL - it was 3 years & 6 months review of financials.

You want to figure out when the transfers were done. Medicaid has a 5 year look back that is based on the date of the Medicaid application so anything loaned to BIL before that date is not a compliance issue. So say mom loaned BIL 20K in Oct, 2012, then you try to do whatever to hold off mom's Medicaid application to Nov, 2017 so it's outside the look-back period. If that is just not feasible as she needs a NH sooner, then you use the info to basically force BIL to either repay mom or private pay for her during the transfer penalty period. Either you go hard-ball on this (and you can get APS involved) with BIL or just private pay for the penalty period or let mom become a ward of the state.

For my mom, the 3 yr 6 mo lookback was on bank statements. I still had to have a on bank letterhead a statement as to the disposition of any and all accounts closed out within 5 years - fortunately as her CD, T bills expired they were not renewed but went into her checking account so it was clear as to where her funds went - the bank officer was really nice about it & it took the better part of a morning and I went in with all mom's old statements and CD info.

I would suggest once you get handle on the past 3 years, you set up an appointment for you & hubs to see an elder law attorney to see what the options are now and before she runs out of funds. At 89, she is not going to get any better or easier to deal with & you want a game-plan to deal with her. Good luck & get organized!

Personally, I would be putting a LOT of pressure on the nephew to be making regular payments. He must stay current on those payments.
Some states are now doing 7 year look-backs. More and more states are invoking "filial responsibility" laws and will seek judgment against the child she gave money to. If I were you, gosh, I'd want a lawyer helping with this.

Pam - the legislation that set in place the current medicaid look-back rules that was done back in 1993 (?) allows for a 10 year look back!! 10 years is just too much for state workers to deal with so it's been a 3 year or a 5 year as that is more manageable. In looking at my crystal ball, I see the Medicaid application being outsourced, much like what PCG & HMS is doing for the required MERP program. And right when the boomers start to really hit applying for facilities. It is going to make the current application look like a cakewalk. I'd bet a case of Prosecco that AL or GA being the test state for doing this too.

A case of Prosecco? No bet! Here in New York, the look back is still 5 years, but Trusts and Life Tenancy are already vulnerable. Mom has Life Tenant status on her house. At age 88, she gets about 30% of the proceeds if the house is sold. So we just rent it out and use that to pay the ALF.

Was she mentally capable when she signed the loans?

If your husband's POA is active on account of your MIL's mental incapacity, MIL cannot enter into a contract and therefore any co-signature will be invalid. But rather than screw up nephew's finances by tearing it up, I'd do as Pam suggests and get chapter and verse from nephew about how he's planning to handle his loan - and perhaps point out the contract problem to him, too.

Threaten to force nephew to take in and care of grandma if he runs out of money. That will ensure he will pay! :)

I think the cosigned loan is an unenforceable contract since she was not of sound mind at the time. The loan company can't get any money from her anyway - she's on SS and disability, and once the loan co knows that, they will stop chasing her for payment and pursue the youngster.

To those who say the contract is unforceable, it's important to remember it's not the lending institution's responsibility to prove her competent. It would be the family's responsibility to prove she WASN'T. That's no cakewalk.

I'd want a lawyer helping with this. ..... good solid advice

Toni - I am so sorry you are going through this. Igloo has given a lot of good advice. Hard to follow through, but smart. I co-signed my nephew's BANK loan for college. Unfortunately, he passed in his sleep just before graduation so the loan was put in my name with him as the co-signer, even though he was deceased. His parents quit paying the loan back so I have been paying it to avoid problems with my credit - it was only $50 per month since it was one of many loans. However, all the other loans were government loans and were written off at his death. Now I am unemployed and waiting on my disability application to be approved so I don't have the funds either - it can be quite a mess. Igloo - I wish I had had to go through a course like you are referring to. I also co-signed for my niece's college loan for a government loan (so I would never get stuck with that one) but it didn't have such a program either. My sister also got my dad and his wife to co-sign for yet another loan and I just pray they don't get stuck with it. None of us ever thought they would just not pay for their kids after having gotten us to co-sign. But back to Toni, there is a lot of good advice here, including talking with an elder care lawyer, but the people who have done this before you are the ones that usually know the ins and outs while the lawyers will keep you safe legally. Good luck!!

{Q}Threaten to force nephew to take in and care of grandma if he runs out of money. That will ensure he will pay! :) {EQ}

Works wonders, also tell him Grandma will be delivered to his residence and he will be stuck with caring for her. {no returns allowed :))

Knowing all too well about student loans, these loans are tied to federal guidelines and if you default, the government will take any income tax refund you have due and make your life a living h*ll. Yes, she is still liable for his loans since she co-signed when she was competent. She has a great many health issues, but the critical one is that she has a terminal illness, from which no one recovers. God bless you and your husband for caring for her!

If she co-signed for the loans prior to her 'impairment'; she is responsible should he default. However, her Estate may be able to take him to court to recover some of the funds - if he has any funds to recover. If she goes on Medicaid - they may go after him under MERP.

Sorry about the h-ll comment I made earlier. The government will make your life heck.

It is such a shame that people take advantage of the elderly- COHERES her into signing a check. Most likely the original loan application was FORGED...

I have seen it happen.... What jerks...