<p>This morning's Baltimore Sun ran this article that originally appeared in the Philadelphia Enquirer about a young man who was in a tragic accident while he was a student. His parents, who had co-signed his private loans, are now paying off the debt. This may lead to new laws on student debt, but not about forgiving it, but making sure people know that even under tragic circumstances, private loans will not be forgiven.</p>
<p>College-loan</a> lenders harass dead student's parents | Say What? | 07/08/2010</p>
<p>What a sad story! And yet another reason to beware of student loans.</p>
<p>So terribly sad…my heart goes out to this family in suffering such a loss. That loan repayment every month must be a reminder of everything their precious son will never be able to realize.</p>
<p>As tragic as the story, the lending institution had every right to demand to be paid back. This is no different than if you had a mortgage, without a mortgage insurance for an event of death or lost of job, a mortgagee is still responsible for the debt no matter what. In the future, if a private student loan is to be forgiven in the event of death, then those lenders will need to price in probability of death for students. It can be easily calculated (insurance companies do it all the time), but it would mean interest rate (price) will need to go up to compensate for the event of death.</p>
<p>oldfort - I agree with you to an extent - the lender has lent the money and has a right to be repaid - but if I co-signed for a mortgage and the other person died - the house would be sold and hopefully would bring enough to pay off the mortgage - or a short sale could be negotiated - there are options. In the case of student loan debt, the young person’s future income was to be the source of debt repayment - there is no asset to be liquidated after death. Credit life insurance or just regular life insurance would have been a great solution - yet I don’t think I have ever seen that point made in any discussion of student loans. It is pretty unusual for someone in their 20’s to have life insurance - but here is an example of why it is a good idea. If a young person has significant student loans and their parents have co-signed - they should have life insurance adequate to pay off said loans with the parents named as the beneficiary. Seems obvious - but I have never thought of that before.</p>
<p>when we got alternative loans for our oldest, we calculated what we would borrow each year and just bought a term life policy on him for the total amount we would borrow, just as rockville mentioned above, I am the beneficiary, .</p>
<p>This family is not trying to get out of paying, and apparently the paperwork included a clause about no loan forgiveness. The story is really about informing people about private loans.</p>
<p>In today’s market, if you sell your house at a loss then the estate will need to make up the difference, the debt is not forgiven.</p>
<p>We, as a society, could make a decision that in an event of untimely death of a student, then student loans will be forgiven, which I have no issue with. But it does come with a cost to everyone, and maybe it’s reasonable for it to be a cost (tax) to everyone. I am just not in the camp of blaming and viewing those lenders as some sort of big bad institutions “harassing” dead student’s parents.</p>
<p>^^I really didn’t get that as the tone of the article, oldfort.</p>
<p>Read the title. When you read the article, the tone isn’t like that, but I guess that’s how they get people to read the article.</p>
<p>Yeah, yeah. That was not the title in the Sun. The Sun’s title was “From family’s tragedy, new student loans law may rise.” I couldn’t find the link on the Sun’s site, so I found the blog.</p>
<p>Appreciate this topic, because it’s never crossed my mind. If we do have to have student-loans (hoping not), I’ll be sure to get the life insurance to cover it in the event of the unthinkable. Thanks for the heads-up on that!</p>
<p>There were few student posters who said they would try to get their wealthy relatives (friends) to co-sign their student loans (remember the one from NYU), and many of us said those relatives and friends would be crazy to co-sign those loans. This is precisely the reason, as a co-signer you could be stuck with the payment.</p>
<p>Good idea about insurance for the loan. S1 is already feeling the impact of changes in the loan market. The federal gov has taken over the application process for fed subsidized loans. His previously approved loans for all 3 years of law school were rejected and he is now scrambling to figure out what to do after 1 year. If we have to guarantee his re-payment, we will look at insurance. And this is federal not private loans.</p>
<p>According to the article, “direct federal loans are forgiven if the borrower dies or is incapacitated.” However, it is a reminder to all of us to read the fine print.</p>
<p>The other good point of the life insurance option is that most 20somethings qualify for the best rate class and a term policy is cheap at their age, yet if their health does change in the next few years, they have protected their future insurability. It doesn’t happen to a ton of kids, but if it happens to your, its nice to have that insurance in place for future needs, too.</p>
<p>Not to de-rail the thread, but does anybody know how long of a term a college-age person can get term-life for? I know about 20 year term-life, but could they get, say, a 30-year term?</p>
<p>I have to agree with oldfort on this one. While I absolutely do feel bad for the family & think that the lender could be more consumer-friendly in handling situations like this one, the bottom line is that this is a debt for which the parents co-signed. The debt does not go away when the borrower dies because there was a co-signer who agreed to pay if the borrower fails to do so. </p>
<p>I am growing weary of being asked to sympathize with people who borrow and ultimately want the debt to be forgiven. Why? Because I have scrimped and saved and lived within my means all my life. I resent having to bear the costs of those who don’t follow the rules they signed up to follow. That is what happens … the rest of us ultimately do bear the costs.</p>
<p>Again, I am not unsympathetic to the plight of this family. I am just tired of being asked to bail everyone else out. My kids go to school where we can afford it, and if I co-signed a loan for them (which, by the way, I would not do), I would expect to pay it back if they could not for whatever reason (which is why I wouldn’t do it).</p>
<p>Totally agree with kelsmom. And others had some excellent points about life insurance. If my son does make it to med school I’m sure we will need to co-sign, so I’ll remember and look into insurance.</p>
<p>My sympathies to the family though.</p>
<p>When my parents cosigned my loans my dad discussed looking into purchasing life insurance for me to pay off the loans. I don’t know if he ever did. I think my parents took out the loans under the assumption that they would have to pay for them, while hoping that they really wouldn’t-- which I think is probably the only smart way to go about cosigning for anything for anybody. You shouldn’t do it if it’s going to cause problems for you if you end up having to pay, to be on the safe side you have to expect that you will pay and be pleasantly surprised if you don’t.</p>
<p>It was made quite clear in all my loan paperwork that it would not be forgiven in the event of my death, the only way we could have mistaken it is if I literally didn’t read anything that was sent to me or answer the phone when the bank called.</p>