College debt after death not a singular concern

Parents Forum
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<p>"Last month, the Bryski family of Marlton won an enormous victory against Key Bank.</p>

<p>Christopher Bryski, a Rutgers college student, died in 2006, but his college loans lived on. The family contacted several lenders, including Sallie Mae, and all agreed to forgive Christopher’s debts.</p>

<p>Key Bank was the only holdout. Bryski’s father had co-signed the loans, and the bank maintained that he still had to pay them.</p>

<p>After years of asking the bank for relief, The Star-Ledger reported, Key finally decided to forgive the loans. . . .</p>

<p>. . . After the story ran in The Star-Ledger, we received a note from Marie Greenhalgh of Upper Montclair.</p>

<p>‘Our daughter Amanda Greenhalgh passed away suddenly in September 2010 at the age of 24,’ Greenhalgh wrote in an e-mail. ‘The grief our family had to go through, and is still going through, is unbearable.’</p>

<p>Amanda graduated with a meteorology degree from Penn State University in 2008. Before her death, she had secured a job that paid $74,000 a year, and she was on time and current with all her student loan payments, her mother said.</p>

<p>But the student loans were not in Amanda’s name alone." . . .</p>

<p>[College</a> debt after death not a singular concern | NJ.com](<a href=“http://www.nj.com/business/index.ssf/2012/05/college_debt_after_death_not_a.html]College”>College debt after death not a singular concern - nj.com)</p>

<p>More: [Sallie</a> Mae Opts Not To Go After Family Of Dead Woman For $120K In Student Loans - The Consumerist](<a href=“http://consumerist.com/2012/05/sallie-mae-decides-not-to-go-after-family-of-deceased-girl-for-120k-in-student-loans.html]Sallie”>Sallie Mae Opts Not To Go After Family Of Dead Woman For $120K In Student Loans – Consumerist)</p>

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<p>These deaths are tragic, to be sure, but I don’t see why a bank take a loss on a business transaction with terms that were explicit to everyone involved. If you don’t want to take the risk of paying off a loan, don’t be co-signer. If you’re concerned about having to pay back the loan in the event if the student’s death, take out a life insurance policy on the student. The bank forgave the loan to avoid the adverse publicity (or to secure positive publicity)–also a business transaction. So I guess the lesson here is that if you want to evade your financial responsibilities, go to the newspaper and see if you can garner sympathy against the big bad bank. I don’t understand why the bank (its shareholders, actually) should take a financial hit because of circumstances that have nothing to do with its own actions.</p>

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<p>another option… if you are going to cosign…take out a term life insurance policy for the amount of the loans. cheap at the student age.</p>

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<p>There’s was another thread on CC on the same topic within the last couple of days.</p>

<p>The banks shouldn’t be left holding the bag on this and IMO terms like ‘relief’ and ‘forgive’ don’t apply - they imply that the banks somehow are entities that run on emotion and that not getting the money they lend in good faith, explicitly detailed in a signed contract, paid back somehow has no effect on the bottom line for the bank.</p>

<p>I don’t understand why people who cosign a loan somehow think they didn’t oblige themselves to be responsible for the loan and in fact, it’s only through that obligation that the loan was made by the bank in good faith to begin with.</p>

<p>People shouldn’t cosign a loan unless they can readily handle paying it back all by themselves or should cover themselves with insurance to cover unexpected conditions like the death or incapacitation of the primary borrower. Even if the primary doesn’t die other things can happen that could impact their ability to pay the loan back - an accident, becoming an alcoholic/drug addict, getting an arts degree (JK - sort of), etc.</p>

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<p>Four years ago shortly after joining CC I wrote something like “Well what happens if the student dies and the whole family is up to their eyeballs in debt for that student? Wouldn’t it make more sense to choose a cheaper school in the first place?” and was flamed all around for thinking negative thoughts about all these healthy young people.</p>

<p>Most of the people who are trapped in these ugly, messy loan situations took those loans out when the economy was growing and they were thinking with the emotions of that moment. That no one (borrowers or lenders) thought through the ramifications of the death/disability/unemployability of any of the borrowers just shows how exhuberant (to use Mr. Greenspan’s word) they all felt at the time. A few more sober brain cells between them could have made a big difference. Clearly the banks should have built an insurance fee into these loans as well. What happens to their investment if all the borrowers die off before the loan is paid off, and don’t leave enough of an estate to cover all of their debts?</p>

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<p>One thing often seldom discussed is how the act of lending itself is also a form of a risky investment. </p>

<p>Some of those risks include borrowers defaulting as a result of tragic “acts of God” such as a sudden death of a student taking out a loan and understandable cultural taboos against banks/well-off loaners going after families who suffered such a tragedy. </p>

<p>After all, one can plausibly argue that in such situations, the banks/lenders should suck it up as a risk they willingly undertook when making such loans, write-off the loss, and move on. In fact, this risk is inherent in any loan one one makes with the hope of a return in the form of repayment of principal plus interest/penalty fees. </p>

<p>If corporations/insurance/businesses can indemnify themselves against “acts of God”…why not individuals/families suffering an unspeakable tragedy?</p>

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<p>Because the parent CO-SIGNED for the loan - he/she is taking on the responsibility in the event the child can’t fulfill it for whatever reason.</p>

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<p>I totally agree with the above posters. I’d never cosign for a loan I wasn’t prepared to pay for.</p>

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<p>There are laws on the books which allow forgiveness of loans in certain situations…whether it is due to going into public service careers or if continuing loan obligations would pose an undue hardship on the individual/family concerned due to them suffering “acts of God” such as suffering injuries placing them on permanent disability.</p>

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<p>No one is usually prepared to suffer an “act of God” such as a sudden injury causing permanent disability or death of a young college student/graduate child.</p>

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But the bank is minimizing the risk by having a cosigner on the loan. If something happens to all of the parties on the loan that’s that’s the risk the bank is taking. In this case it’s about someone wanting to get out of the obligation they signed up for. What’s the point of having a cosigner at all if they’re not obligated to be responsible for the loan? And if the act of cosigning a loan is essentially meaningless if they’re never obliged to cover the loan being paid back then most students will never be able to borrow this kind of money (which one might argue is a good thing or a bad thing).</p>

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<p>I don’t see why this being an act of God changes anything. If I cosigned for a loan there are all sorts of ways paying back the loan could fall to me, most of them fall far short of an act of God. The circumstances of the loan becoming my responsibility don’t change whether I really have to honor the terms that I agreed to.</p>

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<p>“Oh, gee, my poor son lost his job and now he and his wife can’t pay the mortgage on the house. You don’t expect ME to pay for his student loan, do you?? How heartless!” Pea is right, there are a million reasons the co-signer might be expected to pick up the payments.</p>

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<p>I usually am not on the side of the banks, but unless the terms of the loan were deceptively phrased or hidden, I don’t think that what happened nere is right. So now Key is going to have to forgive all loans if the student should die as a matter of course? What if the student is totally disabled? What about those who have paid upon the death of a student?</p>

<p>Fortunately, it’s rare this happens given the low mortality rate of young people. But the terms are there when the cosigners sign. What if the parent had died? Was the student going to pay? What if that had been a car or a house?</p>

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<p>It was a long time ago, but my first mortgage required insurance- interest rates were high, even with a secured loan, the bank needed to see either assets to cover all payments, which we clearly didn’t have) or life insurance. I think it added $7/month to the payments, and would have paid off the loan in case we died. We did NOT add the disability insurance (which was not required) since that was really pricey.</p>

<p>I know it’s depressing and macabre to think of your kid not living long enough to pay back the loan, but insuring a 19 year old is pretty cheap.</p>

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<p>I was very irritated when I got that story in my inbox from change.org. Irritates me still. It’s tragic, I get that, but that’s not the bank’s fault. What is the point of having a co-signer if the bank can’t make them pay after something happens to the student? </p>

<p>Then again, I have very little patience for anyone who whines about student loans in general. Very, very little. With tuition at my public U closing in on $500/credit hour, I can understand very much complaining about tuition (because really- that’s beyond ridiculous), but not about loans. /mini rant</p>

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<p>If that disability is severe enough, there are laws on the books which mandates that loaners must either extend a moratorium period and/or even effectively forgive the loan if the loan’s terms will pose “undue financial hardship hardship”. </p>

<p>As such…being totally disabled would be considered one of the reasons why loan repayment terms may be altered or even taken off the table.</p>

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<p>There’s a gulf of difference between losing one’s job and a family suddenly suffering a tragic death of their college student/grad child. </p>

<p>For starters, the latter tends to be sadly and quite permanent.</p>

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<p>The sympathy and support that the family needs and deserves will come from their extended family and friends. That isn’t the role of the bank, what they needed from the bank was money which they got. I don’t have any problem if the family wants to set up a memorial fund, proceeds of which will go towards repaying the loan.</p>

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<p>I agree with others that this is pretty straightforward. There should be no loan forgiveness for the co-signers since taking responsibility for payment is the exact reason they were cosigners. If you want to mitigate your risk as a co-signer, then it is your option to purchase cheap term life insurance.</p>

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<p>For an unsecured loan, a bank should have the sense to add a mandatory $50 a year or whatever fee to cover term life insurance.</p>

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<p>@romanigypsyeyes: There is a relationship between tuition and loans. If loans are the only way to secure a college education because tuition is so high, an overhaul of the entire system is in order. I know that when my dad went to college CCNY was totally free. When I went I could pay for all my tuition with a NYS Regents Scholarship since I scored high enough on the scholarship exam to qualify. Those days are gone.</p>

<p>However, I agree that that is not the issue in this case.</p>

<p>I concur that the bank is not obligated to forgive the loan, but since it will be such a miniscule fraction of its business I think this compassionate move is not necessarily bad business.</p>

<p>Our kids minor student loans (which we are paying) is entirely in their names.</p>