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I co-signed my brother's student loans over a decade ago — but he's suddenly stopped paying them. What can I do?

Danielle Antosz

Sun, August 16, 2026 at 12:00 PM GMT+3 6 min read

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Nearly half of Americans rely on the previous generation for financial support, according to a recent report from Northwestern Mutual. And nearly 1 in 5 worry they'll never be able to achieve financial independence.

Part of what's making it so hard for younger Americans to support themselves is how much more expensive life is these days. The same report cited inflation as the number-one obstacle people believe is preventing them from achieving financial security.

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However, when the Bank of Mom and Dad isn't available to make withdrawals, that's often when other family members or even friends are called upon to provide financial support.

But helping each other through is what family's for, right? That's what our hypothetical character Paul told himself over a decade ago when his younger brother Darren was getting ready to head off to college. Paul had recently graduated and got his first real job — and since he'd had to hustle all through college to pay his way, he wanted to spare Darren that stress.

Darren promised he'd stay current on his payments and that he'd finance the loan with just his name on it as soon as he could. For years, everything seemed fine.

But now Paul recently learned the loan is several months past due and his brother has stopped paying — and seems to be dodging his messages too. The lender has begun calling Paul directly, warning that they'll soon report the late payments to the credit bureaus.

Taking over the loan payments could undo years of work Paul has put in digging himself out of credit card debt, but letting it default could damage his credit. What can he do now to prevent this from tanking his finances completely?

The risks of co-signing a loan

Recent changes capping the amount students (and their parents) can borrow in federal funds is likely to create even more situations like Paul and Darren's in the future. That's because with a lifetime limit of $257,000, one expert told CNBC private student loans may double as a result.

And many young people — most of them without a credit history or steady income — need to find a family member or friend to cosign those loans. An overwhelming 97% of undergraduate and 74% of graduate private loans were reportedly cosigned in the 2025-2026 academic year.

Unfortunately, this is a risk many Americans often take without fully understanding the consequences. A 2025 Sallie Mae report found that only 30% of families who borrowed money for college had discussed who would be paying the money back.

Private student loans are especially risky for co-signers because they lack many of the protections built into federal loans. There are typically no income-driven repayment plans and few forgiveness options. Even when co-signer release programs exist, they are rarely granted, and generally require the main borrower's approval.

And the fallout can be severe. In some cases, co-signers have faced aggressive collection agencies, lawsuits, wage garnishment, frozen bank accounts or property liens from debt they didn't personally use but are still responsible for.

Keep in mind that default isn't always caused by irresponsibility. Illness, disability, job loss or family emergencies can lead even well-intentioned borrowers to fall behind. When that happens, their co-signers become liable for the debt.

In one case reported by CNBC back in 2024, a private lender excused a 53-year-old woman from repayment when she became disabled, but then transferred the entire balance to her elderly mother, who had co-signed years earlier and lived on her limited Social Security payments. The daughter was left worrying the loan company would end up taking her mother's house.

Unfortunately for Paul, once a loan goes delinquent, co-signers have few options. You must either pay the debt or take the hit to your credit. Depending on your state and the terms of the loan, you may be able to pay off the debt and then sue the original borrower in civil court. However, a lawsuit comes with its own costs.

What to do before agreeing to co-sign a loan

Scenarios like this highlight why co-signing is less about generosity and more about risk assessment. In general, most financial experts caution against co-signing at all. Remember that student loan repayment often spans decades, and a lot can change in that time. If you're considering co-signing on any type of loan, you'll want to weigh these factors:

Can you afford to take over the payments?

Before co-signing, ask yourself whether you could comfortably afford the loan yourself. If you can't or it would cause undue hardship, don't co-sign.

Set communication rules

Some co-signers assume they'll be alerted if a borrower falls behind. That isn't always guaranteed. Setting expectations with the other borrower, such as providing notice of late payments or shared access to the loan account, can reduce unpleasant surprises.

Can they afford to pay?

Trust alone isn't enough. Understanding the borrower's income stability, job prospects, and overall financial situation can help you assess the real risk. If they're uncomfortable being transparent, don't sign.

Remember, refinancing isn't always an option

Many borrowers promise to refinance and remove a co-signer later. In practice, refinancing requires strong credit and stable income, which isn't always possible. Also, lenders often have broad leeway in deciding whether to offer a refinance.

The takeaway here is simple: co-signing means tying your financial future to someone else's ability and willingness to repay debt. And it's not always about trust, since a borrower's disability or death could leave you on the hook. It's a good rule of thumb to avoid co-signing on loans unless you'd be comfortable paying the debt yourself.

— with files from Sigrid Forberg