Hellobee Boards

I thought student loans didn't have to be paid back if the person died.

@Smurfette: this is a common misunderstanding. If there's a co-signer, they're responsible no matter what.

From one of the articles: One of Freddy's student loans was cancelled after his death without a problem: his federal loan. That's because the government cancels student loans if a student dies.

But the bulk of Freddy's loans were private student loans, which typically offer less favorable interest rates and fewer consumer protections. Only a few private student lenders offer debt discharges in the event of the borrower's death, though public outcry over specific cases has swayed lenders to grant occasional death discharges.

EDIT: Also, student loans are the ONLY kind of loans that aren't dischargable by bankruptcy. I remember reading stories years ago about a man dying of AIDS, on his deathbed, his only income SSI disability, and his student loan company was garnishing that.

I didn't read the articles, but I'll probably avoid private loans if I can!

My parents helped me with my school. I got some scholarships, but mostly I had loans. About half were in my name and the other half were in my parent's name. These loans my parents always planned to pay themselves and took out what they knew they could afford because they wanted to help me with my education. We will probably do the same with our children (if necessary - come on 529 - get crazy big!).

gosh, that's terrible. i wouldn't have thought about the option of those cases.

@Smurfette: it says federal loans don't, but private loan companies do make the co-signer pay it back.

i didn't know that student debt isn't wiped out with bankruptcy.

@ladybee: Same here, I borrowed $25k, and now I owe close to $50k. I had no idea what I was doing when I was getting the private loans, I just knew at the time I needed money to afford college.

I really wish rules changed with private loans...

I thought everyone knew if you co-sign any type of loan you're on the hook financially for paying it back....???

My private loans are about half the interest rate of my federal loans, so it's worked out for me; but I would carefully read any type of loan document before signing. I'm sure we'll have to co-sign for LO; if things continue as they are, no one will be giving huge loans to 18 year olds with no income or education. Which isn't a bad thing, in many ways.

@yoursilverlining: I knew that consigning meant you assumed financial responsibility if the other party can't pay, but I had no idea that kind of debt wasn't forgiven if death should occur. Same with filing bankruptcy.

@Mrs. Lemon-Lime: I also saw some of these articles. This hits very close to home for me because I took out a large private student loan for me to go to college and my parents are my cosigners. As morbid as it may sound, they knew that if something happened to me having to take over the loan would be devastating for their retirement so they took out a life insurance policy on me to cover my loans. Right now I meet all the criteria to drop my parents as cosigners so I am working on that and will feel so much better once that happens.

@looch: There is a maximum you can take out in federal loans and it's not always enough to cover tuition and fees. I had to take out about $80k beyond the federal limit from a bank to cover my graduate education.

My interest rate would have been much lower if my parents had cosigned the loans but they were unwilling, for good reason! They had done their part for me by making sure I built credit from a young age with my first credit card in my teens when I got my first job. I'll do the same for my kids.

I will do my best to tell my kids not to take out loans for school. It's not worth it. We're saving for their education, and they can go to cheaper schools to avoid it.

We are making a lot of sacrifices right now to be able to save so that college will hopefully be taken care of for our kids, but if for whatever reason it isn't I would push really hard for them to not take out any loans at all, and I would absolutely not take out of my retirement or co-sign on any loans.

I do not believe that you HAVE to have a private college education to make something of your life, and I think that community college for the first two years is a perfectly legitimate path to take to save money if you don't have the cash. I took out very minimal loans, and it STILL was hard paying them off as a first year teacher. I have seen way too many peers (and people who have shared on here) struggle under the weight of their student loan debt, and I would absolutely not encourage my children to do that to themselves.

There are plenty of other options in most situations, and I think it is an absolute tragedy that so many 22 year olds are coming out of college and are crushed with a mountain of debt that will follow them for so much of their lives. Let alone the kids who go to college, take out the loans, and then never graduate, for whatever reason. They still owe the mountain of debt, but don't even have the education to show for it.

My MIL had a life insurance policy on DH while he was paying back his loans. They had an interesting situation because she mortgaged her house to pay off his loans, and then he was paying on them. So she wanted to be protected in case something happened so that she didn't lose the house.

@Mrs.Pinecone316: We're in he same boat with DH and his parents. They took out life insurance in him a few years ago just to be safe. How did you find out that you qualify for them to come off the loan?

I believe we have a crisis in higher education. I feel as though we have a lot of mediocre institutions that are way too expensive. I also feel as though we've kind of created the situation we are in because we've set the bar so that every person that wants to go to college can, and we've diluted the value of a degree. I think we need to think long and hard about what kind of training our kids need to compete in the global environment and stop thinking about the college experience as the end all, be all.

I do think though, that lenders do have the responsibility to inform their consumers of the products and the risks in plain English. While they do go above and beyond with legal disclosures, they can be very difficult for someone without extensive legal training to understand.

I am VERY lucky that my parents planned to pay for my full college tuition. Same goes for my husband, though he had a lot of loans from grad school which he finished paying off around the time we got married.

My family (well, my dad) is also pretty well-educated when it comes to financial products, so I am speaking from a biased perspective. But I really wish people would be more prudent consumers when it comes to higher education.

What really blows my mind is that a lot of mediocre private colleges charge similar rates as highly competitive colleges. Shouldn't it be cheaper to get a degree if it's not worth as much in the job market?

.@dagret: I agree! I honestly don't really think the school matters in the long run. Maybe at first to get your foot in the door it gives you a little edge, but a few years later, the job experience matters much more. I work in an engineering company and there are engineers from all difference school backgrounds, those who went to MIT (to the tune of 50k/year) to those that went to UMass Lowell (20k/year and not known for being a very good engineering school at all). I'm surprised my parents (since my dad is also an engineer) always pushed for the top best private colleges, when I actually doubt I'd do that knowing what I know now and what he should have seen in the work force also.