In 2009, 27 year old Lisa Mason died suddenly from liver failure. She had graduated two years earlier from Nursing School, quickly found work and began paying off her private student loans on time and without fail. After her death, while her parents had barely begun to grieve, the first call from one of the loan companies came to remind Steve and Darnelle Mason that they were now responsible to repay those loans. For the last four years, this is exactly what they have done.
Big Loans Mean Big Payments
This isn’t a small amount either. Lisa’s original loans of $100,000 is now approaching $200,000 once interest has been added and taking into account the life of the loans. That remaining amount is after one of the lenders reduced the interest rate on several loans and another actually discharged the remaining amount of one loan. Their monthly payment is still in excess of $2000.
The Hits Keep Coming For The Masons
In addition to the grief and dealing with the debt, the couple has also taken in Lisa’s kids and have been raising their three grandchildren on their own. Now, this couple that should be looking at retirement, faces working far beyond 65 in order to get those kids through school and into college. All the while using what was supposed to be their retirement funds to pay off Lisa Mason’s dream of being a nurse.
At one point, Steve and Darnelle were considering filing bankruptcy. Not the best option, but it would have been a way to protect assets for their grandchildren’s future. It was then that they discovered what so many people have learned over the last few years: private student loans cannot be discharged through bankruptcy court. To even try and attempt it requires going through what is called Adversary Proceeding, a very difficult process. The most successful discharge ($85,000) through this took ten years to complete.
So What Can You Do To Prepare For The Worst?
First, understand what you are signing. The Masons state that they never knew they were responsible for the debt in case of their daughter’s death. It is entirely possible that the subject was missed by the loan officers or that the parents just simply didn’t hear it because no one wants to ever think about the death of a child. The responsibility of a co-signer is clearly written though. This is something you need to do for every type of loan, not just student loans.
Second, seek out federal student loans before private loans. In the case of a graduate’s death while paying off a Direct Loan or other federal student loans, the remaining amount can be forgiven completely with no payments levied against the parents or other co-signers. This is not automatic; co-signers will need to apply and must continue making payments until they have received notice that the debt has been discharged.
Third, get the law changed. It wasn’t until 1978 that student loans could not be discharged through bankruptcy. It only took a small number of graduates cheating the system to cause an outcry and then the government overreacted, with Congress passing and President Carter signing legislation that removed the bankruptcy option for everyone. While no wants to see fraud in the student loan business, there is no reason why, when the primary loan recipient dies, the co-signer should have to deal with a private student loan any differently than a federal loan. Write, email, Facebook or Tweet your Congressman or Senator to find out where they stand on this.
While all of this is a tragedy for the Masons and other parents who face this, the reality is that they are not being forced to do anything except live up to their contractual obligations. Is it legal? Absolutely. Is it fair? Absolutely not. If you want to join the petition that the Masons have already started to present to the lending institutions to have their remaining loans discharged, you can find that here. To stay on top of this and other Student Loan issues, keep returning to us here at Student Debt Relief.