Co-signing a loan is like bad credit waiting to happen

A friend recently came to me about a loan she had co-signed for her roommate to pay for culinary school. The roommate completed the program and got a job, but she wasn't making enough money to pay off the loan. She deferred the loan as long as possible, and with each deferral, the loan balance kept growing and the interest rate kept increasing.

Then the roommate met a boyfriend and moved out. The boyfriend didn't like my friend and talked her ex-roommate into forgetting about the loan. So she stopped making any payments on the student loan and left my friend with the bill. My friend wanted to know what she could do because she wanted to buy a house and she was pretty sure this would destroy any chance of her getting a loan. But if she made the payments on the student loan, then she wouldn't be able to afford the house. Ah, what to do, what to do?