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.
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Student Debt Relief Loan Refinancing Advertiser Disclosure
College Ave: College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
College Ave Refi Education loans are not currently available to residents of Maine.
1 – The 0.25% auto-pay interest rate reduction applies as long as the borrower or cosigner, if applicable, enrolls in auto-pay and authorizes our loan servicer to automatically deduct your monthly payments from a valid bank account via Automated Clearing House (“ACH”). The rate reduction applies for as long as the monthly payment amount is successfully deducted from the designated bank account and is suspended during periods of forbearance and certain deferments. Variable rates may increase after consummation.
2 – $5,000 is the minimum requirement to refinance. The maximum loan amount is $300,000 for those with medical, dental, pharmacy or veterinary doctorate degrees, and $150,000 for all other undergraduate or graduate degrees. Information advertised valid as of 04/26/2019. Variable interest rates may increase after consummation.
3 – This informational repayment example uses typical loan terms for a refi borrower with a Full Principal & Interest Repayment and a 10-year repayment term, has a $40,000 loan and a 5.5% Annual Percentage Rate (“APR”): 120 monthly payments of $434.11 while in the repayment period, for a total amount of payments of $52,092.61. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
ELFI: Subject to credit approval. Terms and conditions apply. To qualify for refinancing or student loans consolidation through ELFI, you must have at least $15,000 in student loan debt and must have earned a bachelor’s degree or higher from an approved post-secondary institution.
LendKey: Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
CommonBond: Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate.
Splash Financial: Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval.com
Earnest: To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest’s fixed-rate loan rates range from 3.89% APR (with autopay) to 7.89% APR (with autopay). Variable rate loan rates range from 2.50% APR (with autopay) to 7.27% APR (with autopay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms of 10 years or less. For loan terms of 10 to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 0.26% and 5.03% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of April 23, 2019 and are subject to change based on market conditions and borrower eligibility.
Auto Pay Discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 04/23/19. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice.
Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 303 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, e-mail us at email@example.com, or call 888-601-2801 for more information on our student loan refinance product.