I don’t really see the big deal. Sure it would be nice for the lender to forgive the loan, but the whole point of requiring a cosigner is so you can get your money back in the event that any number of awful things happen to the borrower. And this quote from the petition is just stupid:
Actually, he already “used” the loans when he paid them to his school for tuition. While you’re at it, why not ask the school to pay the money back to the bank instead of charging a “dead student’s family for an education he’ll never get a chance to use”?
I’m not sure what the law is here, in part because “co-signing” is a vague term.
Is the mother actually the debtor, or was she guaranteeing the debtor? And if the latter, what were the conditions? Debt usually dies with the debtor (or, more precisely, it is owed only by the estate, not the heirs) and so the question would be what conditions the debt agreement said she was liable for - for her son defaulting, or for ANY possible eventuality?
It does seem pretty heartless, though, to not just ask for payment but actively, aggressively harass a woman who lost her son.
Shit happens. I have sympathy for the mother, but no opinion about the morality of the situation. However, it occurs to me that if each of the 200,000 people who signed the petition had donated a nickel, the remaining $10,000 debt could be paid off.
I suspect that the publicity will result in someone paying off the loan.
I assumed when I read the story that the mother actually has legal liability for the loan. Now that you mention it, I think there was a thread here about credit card companies which harass families of dead borrowers and try to convince them that they have some sort of moral responsibility to pay their late relative’s credit card bill, which is obviously asinine.
However, if that were actually the case here she’d be better off getting a lawyer and a restraining order rather than a petitiion.
death of one debtor should now be considered a reason not to pay a debt
Or
it should be repaid.
This is one of the reasons people get life insurance - etc. it isn’t fair to those who have properly prepared to be on the hook for higher prices, because of people that aren’t. I would say she should declare bankruptcy, but it is a student loan - and I don’t think that would help.
Also the fact that he is dead doesn’t mean the school didn’t provide what they should have. If he dies while in school - seems only fair that the school should refund at least some of the money. Article doesn’t say, but at 24, he could have been out of school.
Seems to me like he got his education.
What if your car goes off a cliff and you have no insurance - should debt (car loan) be discharged cause you no longer can use the car.
I agree that it seems like a better use of these 200,000 people would be to each donate a half penny to pay the debt (though the PayPal fees on that would kill you).
Also - it isn’t like they have two different databases - one with people with sad stories - and one with regular debtors. If she is late - does she really expect their system to treat her any differently.
Sad story, but people should realize this stuff can happen when they consign loans.
Suze Orman talks about this problem almost every week on her show. As mentioned in the story, Federal student loans have a provision that the loan is forgiven if the student dies. Private loans do not. It would make sense for the law to be changed to provide loan forgiveness in the event of the death of the student.
Suze recommends that anyone who cosigns a student loan take out a term life insurance policy on the student in the amount of the loan.
It’s a sad situation. But if she cosigned the loan, she should pay it back. Her cosigning it probably led the bank to issue it with a lower interest rate.
Why does the law need to be changed to accommodate people who do not carefully consider the consequences of their actions? As you say, people can purchase life insurance (likely to be inexpensive for a student) to cover this eventuality, if they wish.
If a law is passed, the private loan companies will simply increase their interest rates enough to cover the additional risk of default.
Bank to student: “Okay, we’ll give you the loan, but we need someone else to agree to pay back the loan if you can’t.”
Mom: “Sure, I’ll agree to pay the money back if he can’t do it.” Mom thinks “I won’t actually save up money or plan ahead to make sure I can pay back the loan. Surely nothing bad will happen! It’s just a formality so he can get the loan!” Years pass, boy dies
Bank: “Okay, he can’t pay back the loan. You said you would pay the rest.”
Mom: “Oh crap. I didn’t think I’d actually have to pay any money back when I co-signed the loan.”
Bank: “You mean you didn’t think you’d have to pay back the loan when you signed the contract saying that you promised to pay back the loan?”
It’s a tragedy that her son died, but that’s the risk you take when you co-sign a loan I guess. However, I predict a happy ending to this. With only about $10,000 in principle left it sounds like her son must have paid off the majority of the loan already. Given the amount of press this has received and the fact that the bank has probably at least broken even on this loan already, it seems like a good candidate for a human being to step in and say “We’ll call it even.”
In the case of many student loans (and most definitely in the case of a loan worth $200,000), the only reason the bank approved the loan at all was because of the co-signer.
A car loan wouldn’t result in this situation, since no one will give you one if you don’t have insurance on the car. She’d either have to just give back her son’s car, or have the insurance pay for it if he had driven it off a cliff.
It actually works quite well if you take it literally, as other people have mentioned that this situation could have easily been avoided by purchasing a cheap life insurance policy.
Interesting point. It would have resolved the situation. It’s uncomfortable to think about but life insurance on children really is a good idea if for nothing else than to cover the cost associated with the funeral and burial, it’s just not something we like to think about.
I have to side with the bank on this one. I still think it sucks, but people shouldn’t sign the bottom line without considering long-term consequences. Pulling the “boo hoo, think of the grandbaby” sympathy card doesn’t work on me. No one made her co-sign, and no one made him take a private student loan in the first place. I understand that about as well as I understand for-profit universities, anyway.