Debt after college
Some private student loans not forgiven
Published: Tuesday, March 5, 2013
Updated: Tuesday, March 5, 2013 09:03
With FAFSA submissions due by the beginning of April, students are in the middle of financial aid season. Some may be unaware that if they have taken out a private loan, it can haunt their loved ones even after an untimely death.
Several private lenders have policies in place that refuse to forgive a student’s accrued debt if he or she dies before paying it off. In these instances, the lender may target the parents or spouse of the student to become responsible for succeeding payments. This was a surprise to UNO alumna Amanda Overgaard.
“I have not heard about this debt policy, but it sounds terrifying,” said Overgaard, who has taken two loans through Wells Fargo and Great Lakes
There are efforts in place to change this policy. In a press release, William Winters at change.org said more than 430,000 people have signed petitions on the website asking banks to forgive a student’s debt after passing away.
The majority of students with loans have gone through Direct Loans, which are funded by the U.S. government. Only about 350 students at UNO will take out private loans each year, said Randy Sell, director of Financial Aid and Scholarships.
Sell said that private loans are “basically consumer loans offered as educational loans through banks and other private financial institutions.” One such institution is the international bank Wells Fargo & Company, from which a representative could not be reached to comment on this story.
Federal loans are discharged upon proof of death, Winters said. In the case of private loans, he said parents are “saddled” with thousands of dollars of their deceased child’s debt if the lender has no policies in place to forgive it.
As a controversial topic, there are differing views about it. For instance, Mike Olson, a Creighton University alumnus, thinks this sort of posthumous debt collection is wrong. Olson took out a $12,000 loan.
“Why should your family and loved ones be stuck with paying for something that has nothing to do with them?” Olson said. “It was for education, and the person who gained that education is gone. That loan should disappear too.”
Olson said if there is an event where someone would be unable to pay the loan back, such as in death or serious illness, it should be forgiven. Olson recently paid off his student loans.
Not every student believes the debt after death policy is wrong, though. Jessica Eckersley took out a loan to attend Metropolitan Community College and thinks it is necessary for lenders to get the promised money somehow. She said it can be unfortunate, but inescapable.
However, Eckersley said that she believes the lending company should give the family time to mourn and figure out payments.