Legal Question in Business Law in Virginia

I took out a PLUS loan for my nephew to start at the out-of-state college he wanted to attend. The loan was a 30-year loan for $20,000. After his freshman year I told him I couldn't afford to continue taking out loans for the next three years for him, and he promised he would pay back every penny I spent or borrowed for him to get a degree from this university. I considered this an oral contract and went ahead and borrowed more money every year until he graduated.

I made the PLUS loan payments for six years - the four years he was in college and a two-year "grace period" I gave him after he graduated. Well, he finally started making the payments and has done so in fits and starts; he is now $1,000 behind in his payments. The loan is in my name, so I have had to make all monthly payments whether he has given me the money to do so or not. The loan balance is still $65,000 and I don't want to either continue making these payments or spend the rest of my years calling, emailing, and hounding him every month to pay his loan.

Does this oral agreement fit into the category of my being able to legally demand full payment because my nephew has breached the agreement by not making the payments on time? I didn't actually lend him the money, so I know I can't sue for $65,000, but I have to find some way to force him to take out a loan and pay off the PLUS loan and get it out of my name and my area of responsibility.

If he refuses or says he wouldn't qualify for a loan of that size (he would not be allowed to assume my existing PLUS loan and would have to get a private loan), can I then sue him for the payments I made to the PLUS loan every month for the six years before he started making his sporadic payments plus the $1,000 in payments I have had to make since then? I hadn't planned on either asking or suing him for the six years of payments I've made, but if it helps me to use this as leverage to prod him to take responsibility for the current PLUS loan and get me out of the middle of things, I would like to be able to tell him that is what I plan on doing.

This is a very difficult (family) situation and I'm certainly old enough to know that no good deed goes unpunished, but if you could give me some information on how to rid myself of this financial burden I'd very much appreciate it.


Asked on 11/19/10, 10:59 am

1 Answer from Attorneys
Daniel Press Chung & Press, P.C.

Technically you did lend him the money, as a PLUS loan is in your name. You effectively borrowed the money and lent it to him based on his promise to repay. Unfortunately, your right to accelerate the balance is questionable, as you do not have a promissory note spelling this out. If you can, at a minimum what you ought to do now is get him to agree to sign a written promissory note agreeing in writing to pay you. Suing him is unlikely to work, as he can easily discharge his obligation to you by filing bankruptcy.

Read more
Answered on 12/05/10, 8:48 am


Related Questions & Answers

More Business Law questions and answers in Virginia