Nico Costaña's life changed when he came across Michelle Bauer Santos. A street kid, when Nico saw the well dressed woman alone on 5th Street, he decided to take advantage of a seemingly good situation and tried to grab her purse. Unfortunately, in the scuffle, she fell down and appeared hurt. Concerned, Nico stayed to see if she was all right and upon seeing that she was fine, he ran off. Unfortunately, his concern cost him needed minutes to escape and he was caught by the cops. Apprehended, he found himself being defended by Father Ray Santos, a priest who knew Nico and his situation. Ray tried to explain to his cousin, Danny (Michelle's husband) that Nico's parents were killed a few years earlier in the crossfire during a mob hit instigated by the Santos family and that Nico was essentially a good kid. Though Danny felt losing his parents was no excuse for criminal behavior, Michelle realized that the Santos family was responsible for Nico's circumstances, and taking Ray's word that Nico was a good kid (which he proved to her by being concerned for her welfare), she refused to press charges. Not only that, she invited Nico to stay with her and Danny. Though neither Danny nor Nico were happy with that situation, Michelle insisted that they owed the boy something. However, even though she offered to take responsibility for the boy, Michelle left town shortly after to attend a psychology seminar, leaving Nico with Danny. Resentful of the Santos family, Nico kept up a tough veneer and a tough attitude. However, at times he would let a soft spot show, such as when he sang for a 5th Street resident on her birthday (something he loathed to do in front of Danny). He also showed a soft spot for Marina Cooper, the teenaged nanny of Robbie, Danny and Michelle's son.

In 2004, Nico was unnerved to learn that the wealthy Lizzie Spaulding (whom he met at Christmastime) was invited to a rave thrown by Nico's acquaintance, Blade. Knowing how dangerous those raves could be, Nico went to the rave to talk her into leaving and guzzled her untouched drink. Suddenly feeling the high, he pulled Lizzie into a sexy Latin dance. Realizing something was wrong with Nico, Lizzie called her limo, risking getting into trouble with her family, to get Nico to the hospital. At the hospital, a recovering Nico refused to tell Danny just who spiked the drink. Days later, Nico was angry to learn that Danny accused Lizzie selling the drug "D", in a successful attempt to get the name of the dealer, Blade.Months later, Nico's stable world was shattered when he learned from Michelle that Danny was working for the mob again. Incredulous, he confronted Danny who confirmed it. Angered that he'd ever put his trust in Danny, Nico wrote him off forever and headed off to say goodbye to Michelle. Sympathetic, Michelle gave Nico a bus ticket to New York, where her friend Drew Jacobs could help him find a place and enroll him in music school where he could fulfill his dream of being a singer. After saying a tense goodbye to Danny, Nico left Springfield forever, never knowing that Danny was actually working on a sting with the government to bring down the mob.