I Don’t Care If Your Kid Died, Pay Me!!!

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Unfortunately, this is the mantra of many student loan providers, but the practice may soon be coming to an end.

Generally, when applying for financial aid the lender will require that a parent or guardian become a guarantor, or co-signer on the loan.  Thereby, if there is a default on the loan the lender will turn to the parents to satisfy the debt.

But what happens if the student/child passes, or becomes severely incapacitated before the loan is paid off in full?  Up until a couple of years ago the policy of virtually every lender was one of indifference, and the guarantee made by the parents was pursued aggressively.

It appears there may be a shift in this draconian and heartless practice.  As detailed in this article by the Wall Street Journal, only a couple of years ago Sallie Mae, modified their policy after a public tragedy, to relieve the guarantor parents of student loans of their obligations.  Recently, Wells Fargo also became one of the benevolent revising their policies as well.  However, there are significant numbers of lenders who continue the practice of going after the guarantor, even after death.

Congress appears poised however to be on the verge of mandating a bit of a heart to the cold lenders who continue to harass parents in the wake of tragedy.

“The U.S. House of Representatives passed its version of the Christopher Bryski Student Loan Protection Act in September, and the bill was introduced in the Senate earlier this month. The bill honors a Rutgers University student who died in 2006 but whose family continues to make monthly payments on his $44,500 in private loans.”

Be cautious whenever co-signing any loan, the perils are great and may last even after death.

Image: FreeDigitalPhotos.net

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About Anthony Candella

Anthony is the founder and Directing Attorney of YourCreditAttorney.com and has been helping consumers just like you understand and improve your credit and financial situation since 2003.

  • Chuckkel

    Death is no excuse in not paying off a loan. That’s why you carry health and life insurance to cover bad circumstances. Never guarantee for someone else.

    • http://www.facebook.com/jay.repko.3 Jay Repko

      This is a rabbit trail issue. The big issue is the large number of unpaid student aid loans. As someone who worked his way through college 25 years ago and paid off my loans ($5000) within 3 years of graduating, I can say been there done that. Also I didn’t have to have my parent(s) (divorced and broke at the time) co-sign for me to get the loan.

    • http://www.facebook.com/Ry.P.Kelley ‘Ryan Patrick Kelley’

      Yeah, dead people should have to pay their fair share too!!! What a dipshit.

  • morganfrost

    Whoa, why is this practice “draconian” or “heartless?” If students want to get loans at good rates, sometimes they will have to rely on parents to guarantee those loans. If we make a new rule that the death of the student will release the guarantor of the loan from his or her obligation, then the cost of student loans will go up. If parents are worried about this when they sign the loans, they should insure their children.

  • Ayala

    This is not “draconian” or “heartless.” This is business. If you borrow something that does not belong to you, when you die, it goes back to the rightful owner, whether it’s a lawnmower or a car or a toaster. In this case, what you borrow is money and the rightful owner is the lender. Just because you die doesn’t mean the one who loaned it to you isn’t still entitled to get it back. If parents cosign on a loan, they are agreeing to be responsible for it. If the child dies, that sucks for the parents, but the debt is still theirs. Why should the lender, who had nothing to do with the death, suffer just because some people think sad feelings should exempt them from their obligations? If you can’t afford to pay the loan back, then don’t cosign for it. Stuff like this is why life insurance exists. It’s not the lender’s fault your kid dies, but it IS your fault that you are responsible for their debt.