It was grandpas choice to consign. Sorry, but I think his assets should be used to pay.
The loans in question were the SallieMae SmartOption loans, which reading up on them the co-signer dying and the loans coming due was the point of a scathing government report on these loans. In this case Grandfather was very elderly, no insurance, all of his assets were owned by the entireties with his wife in a state that does not have community property laws. Otherwise Grandma would be in dire financial straits since their assets were not all that astounding to begin with. The worst part is that I don’t think either kid really wanted to go to the schools their Mom pushed them into.
The smart thing for the lender to do would have been for Grandma to co-sign as well, but she didn’t and her assets are untouchable since she wasn’t on the loan and in our state she owned an undivided full interest in their joint assets as spouse, not a half interest as in a community property state. The result would have been far different if she had passed first and his estate would be on the hook for the loans. No trusts involved, and truthfully looking at the application I can’t believe a responsible lender would accept him as a co-signer, then again, calling SallieMae a responsible lender would be a real joke. I doubt he had much understanding of what his daughter, my sister-in-law, was placing in front of him to be co-signed to be truthful as slowly progressive dementia was an issue during those years.
Rather than continue to hijack this thread, let me get back to the point being made to the OP, these private loans have all sorts of nasty bits and terms hiding in them that most people wouldn’t read or understand, so avoid them if at all possible, or cover with life insurance as noted by posters above. Avoid any loans if possible, especially if your child is going on to a further graduate/professional degree, as they can add up incredibly fast.
^^
wow…
Scary to think that in community property states, a spouse (w/o approval of the other spouse) could co-sign loans, then die, and then the surviving spouse could be left with little as the lending bank takes half to pay off the co-signed loan.
Maybe in those CP states, when married people are cosigning, there needs to be a notarized signature from the other spouse indicating an agreement with the spouse’s decision to cosign.
It doesn’t always work that way. Community property has to do with income. Community income can be used to pay the necessary household debt of the spouse. This would probably not be considered a debt for family or household use. We made loans all the time to only one spouse in community property states. There was a box on the application asking if it was family use (or alternatively what the loan was for and people always said ‘family needs’). If a couple wanted both incomes to be considered to qualify, then they’d both sign, but otherwise it was one signer.
To get to use the spouse’s income to pay on the loan, the lender would have to get a judgment naming the spouse as a party, and then file against the spouse’s income - bank account, employer for garnishment.
In any state you can have assets pass to a spouse or usually any other person outside of an estate. Joint bank accounts can be ‘pay on death’. Insurance pays to a beneficiary outside of the estate. Homes can be held in joint tenancy (any two or more people) to estates by the entirety and the whole thing passes, outside of probate, to the other party. Creditors really only get a crack at the estate. If there is no estate, creditor is SOL.
Even if as thumper1 suggests the grandparent buys term life, that doesn’t go to the creditor, it goes to whoever is the beneficiary, and the deadbeat grandchild could still choose not to pay the debt. The creditor may have something to attach after getting a judgment, but it is not a direct payment to the bank. That’s only for credit insurance, and that’s not available to people over 65.