My mom had taken out a pretty hefty sum of money for me over the last five years in the form of Parent PLUS Loans for my education. I’d estimate somewhere in the area of 50-60 thousand dollars.
With her passing, I called up AES to alert them to the situation. It had always been my intention to pay the money back for her once I was graduated, and so I asked the customer service rep if it would be a simple issue of changing the billing for the loans.
He informed me that, no, the loans will most likely forgiven.
Forgiven as in…gone. Stricken from the record. As in, I don’t owe a dime. I did some googling and found this page informing me that not only can loans not be transferred to the student, but that they are in fact forgiven in the event of the loan holder’s death.
I’m just…stunned. And I can’t help feeling a little paranoid that someone’s going to come to our house and say “hey, since your mom owed 60,000 dollars, we’ll just take this house, kthanx!”
If this is indeed the case, it’s such a weird feeling that this 60,000 dollar debt looming over my head has just evaporated.
I hope you have a lawyer already looking over your mother’s estate. Civil servants can give well intentioned and best of their knowledge information to people, in good faith, and still be wrong. Don’t start counting your chickens, yet.
IANAL or even a loan officer but children don’t generally inherit debts from their parents when the parents die. She could have bought you $50,000 worth of stuff on credit cards too and you wouldn’t owe that either at least not directly. Her estate is what will settle everything up at the end. If she didn’t have much, there won’t be anything for them to take and that will most likely be the end of it. Even if she did have substantial assets, it would still be her estate that is responsible for the loans and not you directly.
Interesting. When I went to university, the student loans were in my name, not my parents’. I got to pay them back. OSAP took into account my parents’ income, and that affected the amount of grants I got. But my parents weren’t on the hook for any loans.
(And I hope things are going as well as they can for you and your family, Soapbox.)
It’s true. I just started a new job in the financial aid department at my university, and I can tell you that it is true. Student loans are forgiven for the one that took the loan out. We require a copy of the signed death certificate in our files; the lender requires the same information. The PLUS loan is taken out by the parent, and they are responsible for paying the debt.
I’ve worked in financial aid, too. Some time ago – but, the PLUS loan program is the PLUS loan program, and that’s how it worked back then. The loans were her debts and, like the Stafford loan program, the debts are forgiven if the debtor dies…they are not attached to the estate.
That is a nice gesture but I don’t think it should necessarily be looked at that way because the system is set up with such conditions on purpose. Debt isn’t directly transferable at death and all loan terms even if they are just credit cards are built around that principle. Everyone pays a hidden form of insurance in the terms of the loan that account for this scenario. The lenders are fully aware they have to just eat the loss when something like this happens and there is nothing for Soapbox Monkey to feel guilty about in the least assuming that the whole loan is just forgiven. That is just one small piece of good news surrounding otherwise terrible circumstances. It isn’t even a loophole. It is simply the law and there is nothing to feel guilty about if you happen to benefit from it.
But is the estate still responsible for paying back the loan. When I hear and read “forgiven” I take that to mean removed from the record. The only thing in my mom’s estate is basically the house, which my brother and I intend to keep so we can get my sister through her senior year of high school.
I’d much rather pay back 60,000 dollars worth of loans than have some collection agency come and take our house, which is what I’m paranoid about.
In the event of the borrower’s death, or on or after July 23, 1992 the death of the student for whom a parent received a PLUS loan, the obligation of the borrower and any endorser to make any further payments on the loan is discharged.
To verify a borrower’s death, the servicing agency must have the original, certified copy, or clear, accurate, and complete photocopy of the original or certified death certificate. The U.S. Department of Education cannot accept a faxed copy.
I don’t think the idea was “guilty” but “grateful.” My MS was paid in a large part by a fellowship from my local government; I see the taxes I now pay as a way to help other students follow their own dreams.
My intent was to express gratitude only, not guilt. I’m sure Soapbox Monkey is grateful for the terms and conditions of the loan. It’s not a technicality that forgives the loan, it’s how the loan was written for exactly the situation that he is in. I was thinking more along the lines of “pay it forward”. If SBM becomes a famous <whatever he’s majoring in>, perhaps he can contribute to the education of another student in need… not out of guilt but out of gratitude.
Different type of loan. This is a PLUS loan, which a parent can take out on behalf of their child. My student loans are in my name, and I don’t think either of my parents would ever consider taking out a loan on my behalf.