Retiring mom stuck with daughter's college debt?

She co-signed on the loans; her daughter can't afford the payments

To Her Credit columnist Sally Herigstad
Sally Herigstad is a certified public accountant and the author of "Help! I Can't Pay My Bills: Surviving a Financial Crisis" (St. Martin's Press, 2006). She writes "To Her Credit," a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question for the expert

Dear To Her Credit,
I am 60 years old and am getting ready to retire in the spring of 2011. I am co-signed on my daughter's two private school loans, which have grown to over $150,000. Can the lending institutions garnish my retirement from the U.S. Postal Service if we can't come to some sort of agreement that I can afford? Can they attach my husband's wages? (He is not on the loans.) My daughter only makes $10 per hour. -- Paula

Answer for the expert

Dear Paula,
The short answer is no, they cannot garnish your retirement income, and in most states, they can't take your husband's wages if he is not on the loans.

Like everything else, however, it gets more complicated. Say you have your retirement benefits deposited into a joint checking account. Your husband's wages go in the same account, along with any other income from rebate checks to Christmas presents. If a creditor goes to court and gets a judgment against you, he may be able to get money from your account. The bank doesn't know what money is what, and it's not going to try. You might be able to get the money back later that was from your pension, but it won't be easy.

Further, if you are in a community property state, your husband's wages may not be safe even though he didn't sign on the loans. Community property states operate on the principle that in a marriage partnership, both spouses contribute to and benefit from everything financial in the marriage. Debt you have signed on is not automatically his, but a creditor can argue that it is and pursue him.

The first thing you should do is create a bank account just for your pension income. Tell your bank that it is used only for exempt income and that it should not be attached by collectors. (I know, that could be a slightly embarrassing conversation. Better now than later.)

Then you should do everything possible to keep the debt from getting to the lawsuit stage. You daughter can talk to her lender and see if she qualifies for forbearance or other student loan repayment program that lets her delay payment for the time being. If that's not possible, try to work out a payment plan with both you and your daughter pitching in. It's important for your daughter to contribute something, even if it's not much, for her own self-respect.

It's amazing that a person with more than $100,000 invested in education makes only $10 per hour, but unfortunately, it's not unusual in this tough economic climate. Still, the plan when she took out the loans was for her to graduate, get a good job and pay the loans off herself. It's not too late for that to happen. Despite high unemployment, some people are still getting jobs, and I hope your daughter is next.

In the meantime, you may not be retiring this spring after all. It doesn't look like you can afford it until your daughter takes over her own student loan payments. I don't mean you can't retire from the postal service. You've probably been there a long time and are more than ready for a change. But at age 60, you are not old. You're not much older than I am!

I've always thought if you can't wait to retire, you're in the wrong job. Think about the things you've wanted to do after you retire. Can you find a way to get paid to do something that interests you? You'll have your pension, so you have a little freedom to try something new that might pay less. If you can't stand the idea of getting locked into a 9 to 5 job right away, think about seasonal work, or start your own business.

People often ask about bankruptcy when faced with debt much smaller than your daughter's. However, this would be a terrible stage of your life to go through that. You may never recover financially. And student loans are generally not dischargeable in bankruptcy anyway.

Let's hope the economy improves this year and your daughter can pursue the dreams she had when she went to college. I hope your personal economy improves, too, and that you find meaningful, interesting work you like so well that you won't want to officially retire for a long time.

See related: What types of income are protected from wage garnishment?, Take these steps to avoid wage garnishment, Compare states' community property laws, 4 steps to settling privately funded student loans

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Updated: 11-20-2017