Father Forged Kids Names on Student Loans. Do They Owe Them?

Question:

Dear Steve,

My ex husband left 2 of my children with over $100,000 each with student loan debt. He signed loans with their names without their knowledge, he missed months of payments which incurred high interest rates and now these kids both under 30 are saddled with these debts.

They are beyond upset and see no end to paying off this debt. Neither myself or my children were ever made aware of this situation until recently when the debt collectors started calling.

I would like to know if there are any new laws to help in these situations and/or what if anything can be done to alleviate this burden for them

Paula

Answer:

Dear Paula,

As you can imagine, this is a complex problem. On one hand you have the issue that the kids were clearly victims of identity theft. On the other hand it appears they received the benefit from the loans.

So here is how I see the problem, and I’m assuming these are federal student loans since they constitute the largest group of loans.

The first and most immediate step would be for the kids to file a police report with your local authorities about the alleged identity theft. This is critical. The kids will need the police report number to move forward. The children may be asked and must be willing to participate in legal charges against their father and pursue a conviction that might include jail time. If they are not, stop here and start working out a payment arrangement.

Next, the kids should report the fraud and the police report number to the U.S. Department of Education, Office of Inspector General. Click here. There is an online form to file the complaint.

The biggest hurdle I see is if the Department of Education can convinced and satisfied it was fraud and they then relieve the kids from the liability of the loans, the loans will probably be clawed back from the schools. In that case the schools will probably go after the kids to repay the education they received. The agreement to attend is between the kids and the school.

If this was a situation of identity theft where the kids didn’t get the benefit, then it would be an easier matter to deal with.

If these were private loans the process would be similar but the ability to convince the private lender of the fraud without a successful conviction will be very tough.

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This article by Steve Rhode first appeared on Get Out of Debt Guy and was distributed by the Personal Finance Syndication Network.