Student Loan

Discussion in 'The Lounge' started by negiqboyz, Nov 5, 2012.

  1. negiqboyz

    negiqboyz Well-Known Member

    I don't have any experience dealing with student loans cuz all my expenses were paid by scholarships. Anyway, I recently read on the paper that a mother whom cosigned her son's student loan is required to pay off it even though he's dead years ago. I thought the loan is forgiven upon death .. any legality on this. This isn't like a mortgage where you have physical ownership.
     
  2. ralphrepo

    ralphrepo Well-Known Member

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    It really depends on who (federal or private) issues the loan and what the individual terms and conditions are; student loans are NOT all the same, but generally ALL have to be repaid regardless if the student graduates, finds, work, or even dies. Though there are some plans in the works to offer limited relief, nothing is written in stone yet: http://www.voxxi.com/student-loan-relief-is-there-hope-in-the-horizon/

    You're correct in that there is no physical ownership or collateral, like a home or a car; but this was money that was taken as a personal loan for tuition purposes. You borrowed the money, paid tuition, hence, you (or co-signer) owe the money and must repay it. In reality, the loan company doesn't care what you did with the money (golf lessons, vacation, whatever) as long as you pay it back. If you drop dead, then typically your co-signer is on the hook. Note: there is nothing that states one must graduate from school or even find a job in the field of one's study. Regardless, you will owe any money borrowed plus interest. Of course, this has led to tremendous buyer's remorse over the years, as thousands of graduates lament the money they spent on college as an absolute waste. This is especially so when they cannot find work in their field of study.
     
    #2 ralphrepo, Nov 5, 2012
    Last edited: Nov 5, 2012
  3. Co signing just means you are the backup person to pay off the loan if the primary person can not... so if s/he is dead.... it falls to the co-signer.
     
  4. lala_bel_tempo

    lala_bel_tempo Well-Known Member

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    To co-sign mean you have faith and trust in the primary person who will sign. I believe government loans (in AUSTRALIA - High Educational Commonwealth Support) e.g. HECS is not repayable if (1) you leave are not in the country, (2) do not exceed $45,000 a year in disposable income and (3) perish. Private institutional loans e.g. banks is what you would be describing.
     
  5. ralphrepo

    ralphrepo Well-Known Member

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    Often, the problem within the US student loan system is the mistaken perception that students will be forgiven their loans if they met with some unfortunate life event that upset their career (ie ability to repay) plans; no, that is not so. Sure, there are thousands of stories out there about well heeled doctors and lawyers who, despite their high incomes, had failed to pay back their student loans. But that is a failure of the system, not the intent. Everyone who ever borrows money owes it back. The problem faced by most students (unless you're one of Mitt Romney's sons) is that they usually don't have a dime to speak of. So in order to have enough collateral for a loan, they usually require mom or dad to co-sign. Even though this is a loan for education purposes, it is seen as a personal loan. Depending on who you borrow from (federal government, subsidized or not subsidized, or private) the collection process once a default is incurred can be either wishy washy or brutal. The government generally doesn't do a very good job collecting; the private bank loans usually give their defaults over to professional collection agencies, whose money seeking behaviors can border on the criminal.
     
  6. reno

    reno Well-Known Member

    from memory - this slightly changed
    ages ago was something among the lines of if you left the country for "x" years (i think it was 5 or 7), upon returning to country that debt would be wiped clean so u didn't have to pay it back. however now, when u return (regardless however long u left for) u still owe

    the big difference between this in australia and that in the US is that the type of loan is different
    as ralph has mentioned, the "student loan" is more of just a personal loan with the intention for tuition purposes. end of day, there was a backer and now the backer/co-signer takes over and needs to pay it back
    while the student loan in australia is really a student loan. only the student signs for it and if he/she passes away - that is the end of the loan
    just like if the studnet is unable to get a job, they don't pay the loan back until they earn pass the threshold
     
  7. chot

    chot Member

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    it really depends what is written on the agreement and the status of limitation. as some loans when a person die, their families are responsible but there are ways to fix it. the best choice is to find a good lawyer to help out. Even though you need to pay the lawyer but it might be a good choice.
     
  8. ralphrepo

    ralphrepo Well-Known Member

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    I think this was the cause of the original story, just an update:

    http://news.yahoo.com/blogs/abc-blo...0019277--abc-news-savings-and-investment.html

    Apparently, there were a total of three loans, two federal (which were already forgiven) and one private; it is the private lender that is refusing to forgive the debt. There is a petition to get support for getting the lender to see it her (the cosignatory's) way. However, within the petition, I'm in disagreement with the wording; it writes, "..."I'm horrified at your institution's practice of hounding a dead student's family for repayment of student loans he'll never get a chance to use..." Forgive me, but did he use the money to pay his tuition? Of course he did; these loans are generally targeted purpose loans, meaning that you can only use them for a single purpose. In this case it was his tuition, which was paid. What he will never get the chance to use was his education and benefit from it through a full life. But, is that the lender's fault? In a word, no. Further, should tax payers (the federal loan side) have to be burdened by his unfortunate circumstance? I don't think so either.

    IMHO, the promise of a better existence in all of this is directly related to the education. Thus, I think the school should be the one to forgive his tuition, repay his loans to the various agencies as the student never had a chance to use what they sold him. Else, what would happen is, that if private lenders need to forgive loans for catastrophic outcomes in student's lives, then the cost of loans would likely go up even higher for the general population. In other words, the cost of this kind of thing would then be built into each and every future loan for everyone. Obviously not a nice outcome. Of course, this may be another after market for insurance, but that's another story.

    I feel badly for the woman, having lost a son to be hounded like this. But the ramifications of forgiveness would impact the whole educational loan system in a lot of unintended ways that we as a society may not want.
     
  9. negiqboyz

    negiqboyz Well-Known Member

    You got the story. I agreed with you on this. Funny, I was msged with the petition but I didn't sign it. Like I mentioned before, I never went through the loan process for college so I don't know the rules. I only know that you won't be forgiven when declaring bankruptcy. This was good info.