85-Year-Old Faces Financial Ruin Over Child's Education – Daughter Says, 'I'm Worried They'll Take Her House'

In 2004, Sabrina Finch, then in her early 30s, returned to school to become a nurse.

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Her mother, Rebecca, was thrilled about her daughter finally pursuing a stable career. For years, Rebecca had watched Sabrina struggle to make ends meet through low-paying jobs, including stints in fast food and factories.

When Sabrina decided to take out a private student loan from Navient in 2007 to complete her nursing degree, Rebecca agreed to co-sign. Now, both women regret that decision.

At 53, Sabrina lives in Vinton, Virginia, and has faced significant challenges in recent decades. She struggles with bipolar disorder and has developed a resistance to treatments, making it difficult to maintain a routine. As a result, she's fallen behind on her bills, including her student loan payments.

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In May, Navient excused Sabrina from her private student loan after she provided documentation proving her disability prevented her from working. However, the company transferred the loan balance to her mother.

At age 85, Rebecca is battling health issues, including cardiovascular disease and chronic pain from a fractured hip. Several strokes have left her with speech and cognitive impairments. Her only source of income is a monthly Social Security Benefit of about $1,650. Given the loan balance of more than $31,000, there is no way Rebecca can afford to make payments.

Sabrina, acting as her mother's advocate because of Rebecca's medical issues, has expressed concern about the financial strain the loan places on her elderly mother.

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"I'm worried they'll take her house," Sabrina said. And so is Rebecca.

Paul Hartwick, a spokesperson for Navient, a major holder of private student loans, said the company notified Sabrina in April that her mother would become responsible for the loan and that Sabrina was no longer obligated to pay it.

"A co-signer for a loan is liable for the account if the primary borrower cannot or does not make payments on the loan," Hartwick wrote in an email to CNBC.

The price tag for higher education has skyrocketed, and with it, the private student loan market. According to the Student Borrower Protection Center, the industry, worth $130 billion, has seen explosive growth – over 70% between 2010 and 2019. As a result, Americans now owe more on private student loans than on past-due medical bills or payday loans.

One key difference between private student loans and other types of loans is the requirement for a co-signer.

As Hanneh Bareham, a student loans expert at Bankrate.com, explains, borrowers are much more likely to need someone to co-sign on private student loans than other forms of lending. This means that when the student struggles to repay, the financial burden falls on them and their co-signer.

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"There are other loan types that offer co-signers as an option to assist with getting approved or getting a lower interest rate, but many don't require co-signers like some private student loan lenders do," Bareham said.

The U.S. Department of Education offers forgiveness for federal loans in certain circumstances, such as permanent disability or being defrauded by the school. Federal loans also are typically discharged upon the borrower's death.

However, student loan forgiveness is rare with private lenders. Only about half of private lenders will discharge a loan if the primary borrower becomes disabled or dies.

As Anna Anderson, an attorney with the National Consumer Law Center, points out, even when a lender grants a borrower relief, the financial burden often shifts to the co-signer, as Sabrina discovered firsthand.

"It's very, very difficult to get off the loan if you are a co-signer," Anderson said. "We've seen how this can destroy families."

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