The bank’s right. The mother assumed responsibility when she co-signed the loan.
And I suppose when private lenders say, “Well, we’re just going to lend a lot less money,” it would make sense for the government to compel them to do otherwise, no?
One problem: what about the cosigners who are willing to take the risk that the principal borrower will die and they’ll be responsible? Those borrowers are going to have fewer dollars to chase after your sensible law gets passed. Maybe you’ll lend them the extra money!
Incidentally, I agree with everyone who’s said “get life insurance.” GET LIFE INSURANCE. For God’s sake, don’t screw your relatives over, they’ll have enough to worry about.
The number of students who default through death is not going to be large enough to make a huge difference. The Federal government and some private institutions, including Wells Fargo, already do forgive student loans if the student dies. It’s something that will have minimal impact on the lenders, but make a huge difference in the lives of grieving families.
I agree that people need to be fiscally responsible and understand what it means when they co-sign a loan. But I think the Federal government had the right idea when they instituted loan forgiveness at death, and I fully support expanding this policy to private student loans.
That’s a bit unfair on the mother. Yes, she probably didn’t think her son would die, but that’s quite reasonable. And having your child die kinda makes it likely that you’ll then suffer from depression that’ll make work difficult, and make repaying the loan difficult even if you intend to, which is what apparently happened to her. She has actually been repaying the loan for three years.
It does sound like she’s not in a good position to be paying the loan back now. It would be humane, and sensible (in that they’re more likely to get it back) for the lender to arrange repayments at a much lower rate.
It would also be good to find out if they made it clear to her that she would be on the hook in the case of his death, not just if he was alive and failed to make payments. Since he also had federal loans, and those debts are forgiven, it would have been understandable for her to not include “being dead” as the same as “not paying.”
And if life insurance is such a good idea, then the lenders should offer it to them and make it clear that it’s a very sensible thing to take on; perhaps they did that, but if not, then they’re at fault too. Student loans are taken out by all sorts of people, including many who don’t know much about economics. It wouldn’t be difficult for a lender to spend two minutes outlining the benefits of insurance and they’d probably end up making a profit on it anyway.
Signing an online petition is probably the lowest form of slacktivism.
There is already a provision in the law to forgive Federal student loans in the event of the death of the student. The article linked to even points this out - the young man had three loans, two Federal and one private. The Federal ones were forgiven when he died. The private one was not. Why not? It’s a private debt arrangement. In effect it’s no different than a loan to buy a car.
Bottom line - don’t co-sign a loan you can’t pay for. When you co-sign the loan you become responsible for the debt if something happens to the other debtor(s). That’s the whole purpose of co-signing.
Yes, it’s a sad story but I’m sorry, it is now her debt.
That said, because it IS a private loan arrangement it might be that it would be wiped out by bankruptcy as the provisions that apply to Federal student loans aren’t automatic for private loans.
Why exactly should cosigning on a loan from a private bank to pay tuition be different from cosigning on a loan from a private bank for any other reason? If she cosigned on a loan her son took out to pay off credit card bills, she would be responsible to pay it off , even if she didn't think he would die, and even if she then became to depressed to work.
This was my view too. If 5% of those people each sent her a buck, it would be done with.
I had a business partner at one time. We each had insurance naming the other as beneficiary. It was cheap (term?) insurance. We were partners for just a few months before he split. He is a dick.
The payment for the policy was lumped in with my general life/liability/etc. it got paid automatically over the years, totally forgotten about. Fifteen years pass and I just stumbled across the policy and quickly shut it down. Would have sucked if I had died and ex-partner won the lottery!
Of course the bank is right. She signed a loan and there is no reason thy shouldn’t be billing her for it.
Both the thread title and the article headline are wrong. Mom did not INHERIT her son’s loans. If the loan had been in his name alone, then the debt would have died with him. She was forced to take over the liability as co-signer, not as heir.
When she co-signed the loan, she may not have been thinking about her liability in the event of his death, which was after all a very improbable event at the time she co-signed. But it’s important to know what you’re putting yourself on the hook for when you sign an agreement of any sort. And if you won’t be able to hold up your end of the agreement in some circumstances, then don’t sign.
I don’t really see how this sort of situation is any different than if the son had just decided to not pay it back. Yeah, it sucks that her son is dead and she has to pay the money back, but that’s the promise she made when she co-signed. I don’t get to stop payments on my car or some big new TV because someone stole it and I didn’t take that into account. But like was said upthread, that’s what insurance is for. I have car insurance that would cover my car being stolen and help pay off my debt. I have insurance to cover my property incase my home is broken into or burns down. And I have life insurance that will help cover any outstanding debt and burial costs.
In all of this though, with the bad publicity, it might be worth it to the bank to forgive the loan. Or, God forbid, some people signing the petition would throw in a few bucks or something.
Evil big bank is in the right here. My dad cosigned with me on a few loans, and they made it abundantly clear to him that he was just as responsible for the debt as I was. I purposely have him listed as my beneficiary for my life insurance for just this reason. If I died tomorrow my dad would have about 30-40K in student debt to pay off, but the life insurance will more than cover it.
I don’t necessarily disagree with you, but it appears this guy had kids. I would assume the insurance policy would go to them, not his mother.
And it wouldn’t be any better PR for the bank to be robbing orphans than the bereaved mother, IYSWIM. I have no idea if the life insurance would go to the estate and be used to pay off the debt before the heirs got any.
I agree with the sentiment of people donating a buck instead of just signing a petition.
I wonder - if the bank forgave this debt, would they be legally obligated to forgive others in the same situation?
Regards,
Shodan
Can’t one stipulate in their will that the first thing to be paid by the insurance is loans cosigned by mom, then the remainder would go to the kids?
Life insurance is a direct-beneficiary situation. Payouts from life insurance generally pass outside probate, unless the estate is named as the beneficiary.
Life insurance isn’t part of the estate - it goes directly to the beneficiaries, and creditors can’t touch it. You can take out a policy on anyone you’ve got an insurable interest in, which cosigner of a loan would certainly qualify as.
Of course, I’d guess it’s far more common that a student defaults on the loans because he can’t find a job, in which case the cosigner would still be left holding the bag, and life insurance on the student wouldn’t help them at all.
Considering that one of the mother’s complaints was that she has also been trying to help out her grandkid and his mom, I suspect that would at least be a reasonable alternative to the situation she’s in now.
But it appears from what Motorgirl and muldoonthief are saying, the mother would still be on the hook for the debt. Because the insurance would go directly to the grandson and the dead guy’s girlfriend, and grandma doesn’t get anything to pay off the debt. What it sounds like it needed was debt insurance, like mortgage insurance, except it’s for the student loan.
It sucks pretty bad, no doubt about that. The bank wants to be repaid, which is why they had a co-signer. The mom doesn’t want to pay back a loan that hasn’t really benefited anyone, and that she thought the co-sign was just a formality.
If I were the grandma, I would be talking to a bankruptcy attorney. If I were the bank? I don’t know - maybe not cancel the debt, but just stop trying to collect on it. If they can - like I say, I have no idea of the legal implications of any of this.
Regards,
Shodan