Dear Penny,

I hope to retire in four years. I have $ 3,000 in credit card debt and $ 60,000 in auto and recreational vehicle debt. I plan to sell my house and use the equity to buy a smaller house and not have a mortgage.

Here’s the problem: My daughter has lost her job and cannot pay the student loans I co-signed many years ago. My debt-to-income ratio is too high, so the bank won’t give me any more money, like a home equity line of credit or a loan.

I can withdraw money from my retirement to pay for school loans, but I have very little left for retirement. I can’t find any help for school loan co-signers.

My daughter is estranged from me, so she has no intention of helping me or even finding a job.

I don’t know if I will ever be able to retire or if I will end up with enough equity to move out without being able to get a small mortgage if needed. Do you have any tips on how to manage?

-S.

Dear.,

The fact that you haven’t been able to find resources for student loan co-signers is not surprising, as there aren’t many options in this situation.

When you co-signed your daughter’s student loans, you and your daughter also became responsible for their repayment. And since your daughter cannot make the payments, the burden falls on you. You are just as obligated to repay these loans as if you had taken them out for your own studies.

Because federal student loans rarely require a co-signer, I guess they are private student loans. So unfortunately your options for lowering your monthly payments will be pretty much at the discretion of your lender.

I’m saying all this so as not to frighten you. I can only imagine how the financial pressures you feel are compounded by the grief over being separated from your daughter.

But it is important to approach this situation with realism. As you probably know, student loans are almost never discharged in bankruptcy. Your only options are therefore to reimburse them or to default.

This will destroy your credit and could lead to garnishment of your wages. But the option you are offering – to use your retirement funds to pay off your debt – would put your finances on very shaky ground.

The first thing I want you to do is repeat after me, “I won’t use my retirement savings to pay off debt. Repeat if necessary. The purpose of this money is to support you in your golden years, not to pay off your debts. And unlike a bank account, a retirement fund is protected from creditors if you are sued or go bankrupt.

Your best bet is to get rid of your other debt so that you can free up some money to spend on your student loan balance. Doing so will also lower your debt-to-income ratio, which your bank will likely require to be 43% or less to approve you for a mortgage or home equity loan.

From what you’ve told me, your best option might be to sell the motorhome and car and then switch to a cheaper used car. A more drastic approach would be to sell your house now and live off the RV.

If you are not ready to part with your house or vehicles now, you can try to earn some extra income to pay off the loans by renting out the RV and part of your house.

As for your retirement plans: You say that you plan to retire in four years, but you also say that you do not know if you will one day be able to retire. Maybe the realistic plan is somewhere between four years and forever. You may have to retire a few years later than you hoped, but eventually you will retire.

No matter when that day comes, you will be much more comfortable if you take on as little debt as possible during your retirement years.

Robin Hartill is editor at Penny Hoarder and the voice behind Dear Penny. Send your questions about student loans to AskPenny@thepennyhoarder.com.

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