SEARCH

Entries in Loan Forgiveness (1)

Friday
Feb112011

College Loan Forgiveness: When Student Dies, Should Parents Have to Pay?

Photo Courtesy - Getty Images(LAWRENCE, Kan.) -- When John Roark's 26-year-old daughter Jessica died of cancer last August, he went about the sad task of tending to matters related to her death, including finding a burial plot and tombstone and forwarding her mail.

He eventually had to settle matters with three lenders related to her college student loans, though he had not co-signed on them. Even after sending her death certificate to one lender, Wells Fargo, he says he received three letters a week from the bank to collect about $6,000. The other two lenders, Sallie Mae and a Missouri student loan company, expressed their sympathy for the death of his daughter when they forgave the loans, said Roark. However, he said Wells Fargo was "persistent" in trying to collect his daughter's debts.


After her death in August, Roark started receiving the letters, and he called Wells Fargo to explain the situation.

"The operator said they weren't in a position to forgive the loan and wanted to collect on it," Roark said. He then requested to speak to a supervisor who repeated the message, but said that he could write to the Wells Fargo corporate office.

He said Wells Fargo continued to send him notices requesting payment, now addressed to him and not his daughter.

Then, during the same week a local television news station was interviewing Roark about his dilemma, he received a call from Wells Fargo: they were forgiving the loan.

A Wells Fargo spokesperson said the company identified early last year the need for a more formal policy of loan forgiveness in the event of a student's death or permanent disability. Wells Fargo formally enacted a policy in mid-December.

"This policy took some time but the good news is we were able to apply it to this family's situation," said Erin Downs of Wells Fargo. "That's why we're proud to be one of the only private student loan lenders that give forgiveness to co-signers in the event of death or permanent disability."

The increasing cost of college tuition has led to increasing number of students who must borrow for their education. The amount of outstanding student loans in the U.S. is approximately $888 billion, according to FinAid.org.

One of the largest providers of private student loans, Wells Fargo has a portfolio of $26.4 billion of both federal and private education loans, according to the company. Downs said the bank serves 1.9 million student and family customers.

Co-signers are usually responsible for the debt obligations of the deceased. But a student loan may be eligible for cancellation due to death depending on the guarantor, loan type, and terms of the loan, according to Sallie Mae, a provider of federal and private loans. Federal student loans have historically provided loan forgiveness in the case of death, according to Downs.

Roark advises other families who are dealing with their children's estates to take heed when communicating with financial institutions, including taking down names of employees and dates of conversations.

"It's something you have to be vigilant about. You have to take notes or it won't go away," said Roark. "Eventually it was all taken care of. It's all behind us now."

Copyright 2011 ABC News Radio 







ABC News Radio