Grieving Father Struggles to Pay Dead Son’s Student Loans

[marmar]

Grieving Father Struggles to Pay Dead Son’s Student Loans

by Marian Wang
ProPublica, June 14, 2012, 10:05 a.m.


A few months after he buried his son, Francisco Reynoso began getting notices in the mail. Then the debt collectors came calling.

"They would say, 'We don't care what happened with your son, you have to pay us,'" recalled Reynoso, a gardener from Palmdale, Calif.

Reynoso's son, Freddy, had been the pride of his family and the first to go to college. In 2005, after Freddy was accepted to Boston's Berklee College of Music, his father co-signed on his hefty private student loans, making him fully liable should Freddy be unwilling or unable to repay them. It was no small decision for a man who made just over $21,000 in 2011, according to his tax returns.

.....(snip).....

And the loans are maddeningly opaque. Despite the help of a lawyer, Reynoso has not been able to determine exactly how much he owes, or even what company holds his loans. Just as happened with home mortgages in the boom years before the 2008 financial crash, his son's student loans have been sold and resold, and at least one was likely bundled into a complex Wall Street security. But the trail of those transactions ends at a wall of corporate silence from companies that include two household names: banking giant UBS and Xerox, which owns the loan servicer handling the bulk of his loans. Left without answers is a bereaved father. ..............(more)

The complete piece is at: http://www.propublica.org/article/grieving-father-struggles-to-pay-dead-sons-student-loans

[ret5hd]

1. hmmm...maybe it is time to start saying "show me the note" on student loans.

ink on paper, not copies.

[klook]

6. Exactly my thought.

As with home mortgages, some of these lenders likely have no proof of ownership of the debt.

[intheflow]

12. +1

[liberal N proud]

2. They don't care

The greedy bastards are ruthless.

The Student Loan debt in this nation is killing us all. It used to be that the student went and got one loan which was added to until you were out of school, now you have to get one each year and they treat them all separately selling one to one place and another somewhere else. It is impossible to keep track of these loans and your balance. How will you ever know when they are paid off, or is that the plan, they never get paid off?

[catbyte]

3. Another reason to thank Obama for kicking the banks out of student loans

[HereSince1628]

4. Horrible. Anyone know if there is death or disabilty insurance available for student loans?

They've created these loans with no escape via bankruptcy...these loans need mechanisms to deal with catastrophes, such as premature death or disabling of the borrower.

With the sort of money that's being dealt with it seems like it would be in the interest of all parties to the loan. What would $100K term life insurance cost for an 18-20-something?

[sulphurdunn]

8. I wouldn't be

surprised to find out these lenders take out dead peasant policies on these kids, but why would they use them to discharge the debt? That would mean they were about breaking even on the loan. That's not how these people do business.

[juajen]

24. Yes, there is. When I took out my student loans in the mid nineties, a premium was deducted from

your loan to pay for insurance that would pay off in the case of disability or death of the borrower. My loans were paid off after I had a couple of strokes. Generally speaking, students get loans without their parents co-signing. I never co-signed nor did my husband on any of our children's student loans either. I guess the structuring of these loans could have changed, but I haven't heard of this.

[DiverDave]

5. Waiting to hear from

the people saying he MUST pay the loans back
3.2.1...

I think he should get a pass, the loans were taken out under
the impression that the son would be alive and working.

[beac]

7. Oh, but the stockholders, the stockholders, just THINK of the poor stockholders!

Some things should NEVER be "for profit".

[Odin2005]

9. I thought this shit is illegal???

[Pab Sungenis]

10. Not for co-signed loans.

Basically, co-signers are the people who really take out the loan, and then give the money to the person we think of as the borrower. The borrower makes payments but the co-signer is the one responsible for the loan.

This is almost never explained properly by lenders.

[Odin2005]

20. DOH, I missed the co-signed part, my bad!

[Pab Sungenis]

23. I nearly did, too.

There are a lot of cases of debt collectors illegally harassing the families of deceased debtors, trying to force them to pay back the debts that expired with the dead person (unless that person left behind enough of an estate to cover them). This time, however, the debt is legally legitimate although its justness is certainly in doubt.

[Pab Sungenis]

11. One more reason to cut the private lenders out of the loop.

A federal student loan program without the intervention of for-profit banks is the way to go.

[ck4829]

13. Student loan debt is a major problem, doesn't even stop hounding you when you are dead. K&R.

[sasquuatch55]

14. Garnish

And they can garnish your Social Security!

&feature=player_embedded#!

[AnotherMcIntosh]

22. Suze Orman is wrong on this issue as well.

Last edited Fri Jun 15, 2012, 09:48 PM - Edit history (1)

The extent to which Social Security payments are exempt from being garnished or attached by creditors is explained by the Social Security department.
http://www.socialsecurity.gov/OP_Home/rulings/oasi/41/SSR79-04-oasi-41.html

If Suze Orman is not an attorney, she should not be distributing her Will and Trust kit and giving legal advice. The certitude by which she gives such legal advice does not make it right.

In contrast to Suze Orman who has expressed her belief that student-loan creditors can attach Social Security payments without any conditions, an informed attorney familiar with the issue would commonly advise a client to open an account by which the Social Security payments are separately received and not commingle the funds with any other funds.

Incidentally, although it is much more difficult to discharge student-loan debts than other debts, it is not impossible. Even the U.S. Supreme Court recognizes this. The general rule regarding nondischarability of student loan debt is not as high as 99.99999999 % of the time as indicated by Orman.

[Smilo]

15. And they are probably paying the debt collectors more than

the bloody loan.

Absolutely disgusting - but hey it's a private college - the GOPT's wet dream.

[4th law of robotics]

16. In no way should debts be heritable

that's absolutely insane.

Part of the risk you take in issuing a loan (hence the justification for charging interest) is that the person will die before repaying it.

[Igel]

17. They're not.

My father died and payment for any debts came out of his estate--including community property--pure and simple. If his estate hit $0 and all community property were liquidated, no heir would be responsible for one red cent of his debt.

Cosigned debts aren't inherited, cosigners take responsibility for them while the main signer is still alive. When I needed a cosigner fo a loan, it was pretty clear to both of us that if I missed more than a payment they'd skip over me and go after the cosigner for payment.

[4th law of robotics]

18. That makes more sense then

I guess I should have read the article more thoroughly.

I just figured it was something screwy with student loans since they're treated differently in other ways (like you can't get out of them via bankruptcy).

[MrTwister]

19. My advice, move to someplace like Cuba

and tell the creditors to feel free to come and collect . . .

[AnotherMcIntosh]

21. He should see a good bankruptcy attorney and not assume that all student-related loans cannot be

discharged in bankruptcy.

Student loans are difficult, but not impossible, to discharge in bankruptcy. To do so, you must show that payment of the debt “will impose an undue hardship on you and your dependents.”

Courts use different tests to evaluate whether a particular borrower has shown an undue hardship. A common test is the Brunner test which requires a showing that 1) the debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for the debtor and the debtor’s dependents if forced to repay the student loans; 2) additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans; and 3) the debtor has made good faith efforts to repay the loans. (Brunner v. New York State Higher Educ. Servs. Corp., 831 F. 2d 395 (2d Cir. 1987). Not all courts use this test. Some courts will be more flexible, some less.

If you can successfully prove undue hardship, your student loan will be completely canceled. Filing for bankruptcy also automatically protects you from collection actions on all of your debts, at least until the bankruptcy case is resolved or until the creditor gets permission from the court to start collecting again.
http://www.studentloanborrowerassistance.org/bankruptcy/

Even the U.S. Supreme Court has recognized that student-related loans can be discharged under some circumstances.
http://www.supremecourt.gov/opinions/09pdf/08-1134.pdf

[Politicalboi]

26. If he has another child

It's too bad he couldn't use that loan to put them through college.