• Many people who borrow private student loans are required to get a co-signer, a requirement that can spread the pain if repayment becomes a challenge.
• "It's very, very difficult to get off of the loan if you are a co-signer," said Anna Anderson, a staff attorney at the National Consumer Law Center. "We've seen how this can destroy families."

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

Her mother, Rebecca, was excited for Sabrina, then in her early 30s, to finally have a career. She'd watched for years as Sabrina struggled to get by working low-wage jobs, including in fast-food restaurants and factories.

As a result, when Sabrina took out a private student loan from Navient in 2007 to complete her nursing degree, Rebecca was happy to be the co-signer on the loan.

Both women have come to regret that decision.

Sabrina, who is now 53 and lives in Vinton, Virginia, said her life took many difficult turns in the last two decades.

She said she became resistant to treatments for her bipolar disorder and found it difficult to get out of bed on many mornings. Consequently, she fell behind on her bills.

In May, Navient excused Sabrina from her private student loan after she proved her disability left her unable to work. However, the company then transferred the loan to her mother.

Rebecca is now 85, with health challenges of her own, including cardiovascular disease and constant pain from a fractured hip. Several strokes have left Rebecca with speech and cognitive issues, Sabrina said.

Rebecca's only income is her roughly $1,650 monthly Social Security benefit. There's no way she can afford to pay down the loan balance, which is more than $31,000, Sabrina said.

"I'm worried they'll take her house," Sabrina said. So is Rebecca, she said.

Sabrina spoke on her mother's behalf, given Rebecca's extensive medical issues.

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

"A co-signer for a loan is liable for the account if the primary borrower cannot or does not make payments on the loan," Hartwick wrote in an email to CNBC.

Lenders require co-signer on most private student loans

The private student loan market is skyrocketing — and with it the number of family members and friends who are also on the hook for the debt as co-signers.

As the cost of higher education swells, the $130 billion private education loan industry has grown —more than 70% between 2010 and 2019, according to the Student Borrower Protection Center. Today, Americans owe more in private student loans than they do in past-due medical debt or payday loans.

Borrowers of private student loans are much more likely to be required to have a co-signer compared with other kinds of lending, said Hanneh Bareham, a student loans expert at Bankrate.com.

"There are other loan types that offer co-signers as an option to assist with getting approved or getting a lower interest rate, but many don't require co-signers like some private student loan lenders do," Bareham said.

Indeed, more than 90% of private student loans include a co-signer who is equally financially and legally responsible for the debt, according to an analysis by higher education expert Mark Kantrowitz.

"A co-signer is often required for a private student loan because the student borrower has a thin or non-existent credit history," Kantrowitz said. "They are an unproven asset."

But there are many financial risks and few safeguards for co-signers of private student loans, said Anna Anderson, a staff attorney at the National Consumer Law Center.

"It's hard to predict how things will turn out for the student when they first take out the loan," Anderson said. "Graduation is sometimes years down the road, and there is no guarantee that the student will be able to graduate at all."

Nearly half of all borrowers ages 50 and up who co-signed on a private student loan ended up making a payment on the loan themselves, a 2017 AARP survey found.

"It's truly an inter-generational problem," said Persis Yu, deputy executive director at the Student Borrower Protection Center.

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

The U.S. Department of Education, which typically doesn't require co-signers on its federal student loans, forgives the debt of borrowers who become permanently disabled or can prove they were defrauded by their schools. Federal student loans also die with the borrower.

In contrast, student loan forgiveness by private lenders is extremely rare, experts say.

Only about half of the lenders discharge the debt when the primary borrower becomes disabled or dies, according to Kantrowitz, who's been tracking education loan data for decades.

Even when a lender does grant a borrower relief, as Sabrina found, the debt then often falls on their co-signer, said Anderson, of the National Consumer Law Center.

"It's very, very difficult to get off of the loan if you are a co-signer," Anderson said. "We've seen how this can destroy families."

Carolina Rodriguez, director of the Education Debt Consumer Assistance Program, or EDCAP, in New York, agreed.

"Based on my experience, co-signer release is virtually non-existent in practice," Rodriguez said.

Indeed, the Consumer Financial Protection Bureau found in 2015 that private student lenders rejected 90% of co-signer release applications.

Her private debt has nearly doubled

In October, Sabrina was approved for disability benefits through Social Security because of her schizoaffective bipolar disorder. Another neurological issue she's recently developed requires her to use a wheelchair most of the time.

"I really wanted to keep nursing, but my mental illness kept me from doing it," Sabrina said.

The Education Department often forgives the federal student loans of borrowers who can document that they're receiving Social Security disability benefits over a long period. Sabrina didn't need to go through that process, because the Education Department canceled her federal student loan balance in October through its recent relief efforts for those who have been in repayment for many years. Her federal student loan debt was around $120,000.

But her private student loan balance has only grown.

Sabrina originally borrowed $17,600 from Navient in 2007; the loan balance is now more than $31,000, according to information provided by Hartwick. The variable interest rate is currently set at 10%.

Sabrina said Rebecca, who is now responsible for the debt, can't afford the $312 monthly loan payment.

Rebecca worked low-wage jobs throughout her career, mostly as a cashier at a truck stop. Her mortgage payment, at around $635, eats up more than a third of her $1,650 monthly Social Security benefit.

"My mom barely makes enough to cover her basic human needs," Sabrina said.

Sabrina said her worst fear is that the lender will come after her mother's two-bedroom house in Troutville, Virginia. She said one of the callers from Navient mentioned that possibility to her. Rebecca's house was built in the 1950s and has a leaking roof and no heat, among other problems that the family can't afford to fix, Sabrina said.

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

Hartwick, of Navient, said he couldn't comment on whether the lender discussed the possibility of a lien on Rebecca's house.

"But I can say, in general, private student loans do not go into collections until after a period of delinquency," Hartwick said. "And, like other loans, there's a process, often lengthy, to take legal action toward repayment."

Lenders of private student loans are incredibly aggressive with their collection tactics, said Anderson, of the National Consumer Law Center.

"We see drastic steps taken where the borrowers are sued, and get brought into court and end up with very costly judgments against them," Anderson said. "This can result in liens being placed on their houses, having their wages garnished and bank accounts frozen."

Hartwick said Navient recommended Rebecca apply to the company for a disability discharge herself.

Sabrina told CNBC she has informed Navient that her mother is ill. Sabrina submitted that 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.

"They are unrelenting even though they have the review in process," she said.

Hartwick said borrowers can always contact the lender and share their communication preferences "or update their communication preferences online — including asking us to not call them."

A father's retirement at risk

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

"He was excited about the possibility, and looking to help me fast-track myself into a career," said Cullen, now 41. "We couldn't afford to do the traditional college route."

Unfortunately, Cullen said, the nine-month education program fell far short of the world-class one she was promised by the school's recruiters. Many of her classes were taught by recent graduates of the school and centered on simple knife and food safety lessons, knowledge she could have picked up online, she said.

"You wouldn't expect a whole class to be on learning a basic French recipe like beef bourguignon," Cullen said.

The International Culinary Center, formerly known as The French Culinary Institute, is no longer enrolling students, according to its website. It says it is now collaborating with The Institute of Culinary Education.

Former International Culinary Center students brought a class-action lawsuit against the center in 2014, alleging an "ongoing fraudulent scheme." That lawsuit was dismissed in 2015. Rodriguez, of EDCAP, said the suit was likely settled out of court.

EDCAP is helping Cullen in her efforts to get Navient to cancel her debt. Cullen was not involved in the 2014 lawsuit, Rodriguez said.

"They promised high employment prospects, high quality teachers and courses, and it was a lie," Rodriguez said of The French Culinary Institute. "The degree was worthless."

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

"We therefore cannot comment, as we have no records prior to that time," Fraiman Weichselbaum said.

Cullen, who lives in New York City, said that because of the poor-quality education she received, she's still working as a bartender and earns around $40,000 a year. That makes it difficult for her to meet her private student loan bill each month, she said.

Whenever Cullen falls behind, her father receives phone calls from Navient, she said.

"His phone is just going off the hook," she said. "It puts a huge strain on our relationship."

Anderson, of the National Consumer Law Project, said parents who co-sign on student loans for for-profit schools are at additional risk.

"We have seen many instances of students and family members taking out private loans to cover expenses at for-profit institutions that have a history of poor outcomes for students, often leaving them further behind in terms of job prospects and financial stability," Anderson said.

"This is different than 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," she said.

Asked about Cullen's case, Navient's Hartwick reiterated that co-signers are responsible for the loans when borrowers don't pay, adding that this is the case with many other types of debt.

"If an account is delinquent, we may contact both the borrower and co-signer," Hartwick said.

Cullen said that despite her father saving for retirement for decades, he's now worried 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.

"He's worked so hard to make sure he has a safety net, and the loan puts that in jeopardy," Cullen said.

Her father declined to be interviewed but gave permission for his daughter to share their story.

Cullen is in the process of trying to prove to Navient that her school defrauded her. In such cases, the lender will consider discharging the borrower's debt and releasing any co-signer, said Eileen Connor, director of litigation at The Project on Predatory Student Lending.

Navient provides a form specifically for borrowers seeking cancellation on the basis of school misconduct. However, Navient frequently rejects such requests, even when the federal government has agreed to forgive the student debt for that school, Connor said.

"What we've seen is a lot of denials that don't make sense," Connor said. "There's just not an explanation."

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

Borrowers who have asked a loved one to co-sign the debt have few options, Connor said.

"You have to keep paying, because you don't want to ruin your mother's credit," she said. "They have borrowers trapped."