An 85-year-old mother who co-signed her daughter's student loan years ago is now worried that the lender may seize her home.

• A co-signer is often required for those who borrow private student loans, which can exacerbate the difficulty if repayment becomes an issue.
• "According to Anna Anderson, a staff attorney at the National Consumer Law Center, it is extremely challenging for co-signers to get out of a loan. This can have devastating consequences for families."

In 2004, Sabrina Finch returned to school to become a nurse.

Rebecca, Sabrina's mother, was thrilled to see her daughter, then in her early 30s, finally secure a stable career. For years, she had observed Sabrina's struggles to make ends meet, working in fast-food restaurants and factories.

In 2007, Sabrina obtained a private student loan from Navient to finance her nursing degree, and Rebecca was pleased to serve as the co-signer on the loan.

Both women have come to regret that decision.

Sabrina, a 53-year-old resident of Vinton, Virginia, stated that her life has faced numerous challenges in the past two decades.

Due to her resistance to treatments for her bipolar disorder and difficulty getting out of bed in the morning, she fell behind on her bills.

In May, Navient granted Sabrina a discharge of her private student loan due to her disability, but subsequently transferred the loan to her mother.

Rebecca, at 85 years old, faces health challenges such as cardiovascular disease and chronic pain from a fractured hip. Additionally, she has speech and cognitive issues due to several strokes, according to Sabrina.

Rebecca's monthly Social Security benefit of approximately $1,650 is her only source of income, making it impossible for her to repay the loan balance of over $31,000, according to Sabrina.

Sabrina and Rebecca are both worried that they will lose their houses.

Sabrina acted as her mother's advocate due to Rebecca's numerous health problems.

Paul Hartwick, the vice president of corporate communications at a major owner of private education debt, informed Finch in April that the loan would be transferred to her mother if she was removed from it.

If the primary borrower fails to make loan payments, the co-signer is legally responsible for the account, according to Hartwick's email to CNBC.

Lenders require co-signer on most private student loans

The number of co-signers for private student loans is increasing as the market skyrockets.

The private education loan industry has experienced a significant growth of over 70% between 2010 and 2019, with Americans owing more in private student loans than in past-due medical debt or payday loans.

According to Hanneh Bareham, a student loans expert at Bankrate.com, borrowers of private student loans are more likely to need a co-signer compared to those who take out other types of loans.

Some loan types allow co-signers to assist with approval or lower interest rates, but many don't require co-signers like some private student loan lenders do, according to Bareham.

According to an analysis by higher education expert Mark Kantrowitz, more than 90% of private student loans have a co-signer who is equally responsible for the debt.

"A co-signer is frequently necessary for a private student loan due to the borrower's limited or absent credit history, as they are considered an uncertain credit risk."

Co-signers of private student loans face numerous financial risks with minimal protection, according to Anna Anderson, a staff attorney at the National Consumer Law Center.

"Anderson stated that predicting the outcome for a student who takes out a loan is challenging, as graduation may be years away and there is no assurance that the student will graduate successfully."

A 2017 AARP survey revealed that nearly half of all borrowers aged 50 and above who co-signed on a private student loan ended up making payments on the loan themselves.

Persis Yu, deputy executive director at the Student Borrower Protection Center, stated that the issue is a problem that spans generations.

'It's very, very difficult to get off of the loan'

The U.S. Department of Education typically does not require co-signers on its federal student loans and forgives the debt of borrowers who become permanently disabled or can prove they were defrauded by their schools. Additionally, federal student loans are automatically discharged upon the borrower's death.

Experts say that private student loan forgiveness is extremely rare.

According to Kantrowitz, who has been tracking education loan data for decades, only about half of lenders discharge the debt when the primary borrower becomes disabled or dies.

When a borrower receives relief from a lender, the debt is typically transferred to their co-signer, according to Anderson of the National Consumer Law Center.

"Anderson stated that it is extremely challenging for co-signers to break free from loans, which can have devastating consequences on families."

The director of the Education Debt Consumer Assistance Program (EDCAP) in New York, Carolina Rodriguez, concurred.

Rodriguez stated that in his experience, co-signer release is almost nonexistent in practice.

In 2015, the Consumer Financial Protection Bureau discovered that private student lenders rejected 90% of co-signer release application requests.

Her private debt has nearly doubled

Sabrina was granted disability benefits by Social Security in October due to her schizoaffective bipolar disorder, and now she needs a wheelchair due to a recent neurological issue.

Sabrina stated that despite her desire to continue nursing, her mental illness prevented her from doing so.

The Education Department frequently forgives federal student loans of borrowers who can prove they have been receiving Social Security disability benefits for an extended period. However, Sabrina did not have to go through the process because the Education Department canceled her federal student loan balance in October as part of its recent relief efforts for those who have been in repayment for many years. Sabrina's federal student loan debt was approximately $120,000.

But her private student loan balance has only grown.

In 2007, Sabrina borrowed $17,600 from Navient, which has since grown to more than $31,000. The current variable interest rate is 10%.

Rebecca, now responsible for the debt, cannot afford the $312 monthly loan payment, as stated by Sabrina.

Rebecca spent most of her career working low-paying jobs, primarily as a cashier at a truck stop. Despite earning a monthly Social Security benefit of $1,650, her mortgage payment of approximately $635 consumes more than a third of her benefit.

Sabrina stated that her mother barely earns enough to meet her fundamental requirements.

Sabrina stated that her greatest fear is that the lender will seize her mother's two-bedroom house in Troutville, Virginia. One of the Navient callers had mentioned this possibility to her. Rebecca's house, constructed in the 1950s, has several issues, including a leaking roof and no heat, which the family cannot afford to repair, Sabrina added.

"But it's all she has," she said.

Navient's Hartwick declined to comment on whether the lender discussed a lien on Rebecca's house.

"In general, private student loans do not enter collections until a period of delinquency, as stated by Hartwick. Additionally, like other loans, there is a process, often lengthy, to take legal action towards repayment."

The National Consumer Law Center's Anderson stated that private student loan lenders are extremely aggressive in their collection methods.

"Anderson stated that borrowers who are sued and brought into court often face very costly judgments, which can lead to liens being placed on their houses, wages being garnished, and bank accounts being frozen."

Navient advised Rebecca to apply for disability discharge at Hartwick on her own.

Sabrina informed CNBC that she submitted an application on behalf of her mother on July 26 and is waiting for a determination.

That didn't stop Navient from continuing to contact Rebecca, Sabrina said.

She stated that they remain unyielding despite having the review underway.

Borrowers can always contact the lender and specify their communication preferences or update them online, including requesting not to be called.

A father's retirement at risk

In 2007, Kathleen Cullen enrolled at The French Culinary Institute, a for-profit school in downtown Manhattan, with the goal of becoming a chef. Her father, Ken, a union electrician, co-signed her nearly $30,000 private student loan from Navient.

"Cullen, now 41, was excited about the possibility of fast-tracking his career and looked to help me do so, as we couldn't afford the traditional college route."

Unfortunately, Cullen stated that the nine-month education program did not meet the world-class standards promised by the school's recruiters. Many of her classes were taught by recent graduates of the school and focused on basic knife and food safety lessons, which she could have learned online, she added.

Cullen remarked that it was unlikely for an entire class to be focused on mastering a fundamental French dish, such as beef bourguignon.

The French Culinary Institute, now known as The International Culinary Center, has stopped enrolling students and is currently collaborating with The Institute of Culinary Education, according to its website.

In 2014, a class-action lawsuit was brought against the International Culinary Center by former students, accusing the center of an "ongoing fraudulent scheme." However, the lawsuit was dismissed in 2015. Rodriguez, of EDCAP, stated that the suit was likely settled out of court.

Rodriguez stated that Cullen was not involved in the 2014 lawsuit, and EDCAP is assisting her in her attempts to persuade Navient to cancel her debt.

"Rodriguez stated that The French Culinary Institute had promised high employment prospects, high quality teachers and courses, but it turned out to be a lie, as the degree was worthless."

In 2020, the Institute of Culinary Education entered into a licensing agreement with [The French Culinary Institute/ The International Culinary Center] after their closure, as stated by Stephanie Fraiman Weichselbaum, public relations and communications director at the Institute of Culinary Education, in an email to CNBC.

Fraiman Weichselbaum stated that we cannot provide a comment because we lack records prior to that time.

Cullen, a resident of New York City, stated that despite receiving a subpar education, she remains employed as a bartender and earns approximately $40,000 annually. This makes it challenging for her to meet her monthly private student loan payments, she added.

Whenever Cullen lags behind, her father receives calls from Navient, she stated.

""Our relationship is being put under a lot of stress because his phone is constantly ringing," she stated."

Parents who co-sign on student loans for for-profit schools face additional risks, according to Anderson of the National Consumer Law Project.

Anderson stated that many students and family members have taken out private loans to cover expenses at for-profit institutions with a history of poor outcomes for students, resulting in further financial instability and decreased job prospects.

When someone co-signs on a loan for something tangible that their loved one will benefit from right away, such as a car or an apartment, it is different from this situation.

Navient's Hartwick emphasized that co-signers are liable for loan payments when borrowers default, stating that this applies to various types of debt.

We may contact both the borrower and co-signer if an account is delinquent, as stated by Hartwick.

Despite her father saving for retirement for decades, Cullen is now worried that her debt will upend his plans. The private student loan currently has a 15% interest rate, and the balance is nearing $77,000 today, more than double what Cullen originally borrowed, according to financial records reviewed by CNBC.

Cullen stated that the loan poses a threat to the safety net that he has worked so hard to establish.

Although her father refused to be interviewed, he granted permission for his daughter to disclose their story.

Eileen Connor, director of litigation at The Project on Predatory Student Lending, stated that in cases where a borrower is trying to prove that their school defrauded them, the lender will consider discharging the borrower's debt and releasing any co-signer.

Navient offers a form for borrowers seeking cancellation due to school misconduct, but frequently rejects such requests, even when the federal government has agreed to forgive the student debt for that school, according to Connor.

"Connor stated, "We've observed numerous denials that lack logic, and there seems to be no explanation.""

Hartwick declined to comment on Navient's debt cancellation process for defrauded borrowers.

Few options are available to borrowers who have requested a loved one to co-sign their debt, according to Connor.

"You must continue to pay, as not doing so would harm your mother's credit," she stated. "Borrowers are ensnared."