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Loans won’t disappear after death

Student loans make it possible for many students to attend college and most students expect to graduate and pay them off – but the untimely death of two University students this summer shows that this may not always be the case.

The way that lenders handle debt if a borrower dies depends highly on two things: if there is a co-signer for the loan, and the loan specifics, which can vary from lender to lender.

Having a co-signer, while almost necessary for students with bad or no credit, is the route in which debt will likely have to be paid back – by whoever co-signed the loan.

University Senior Steve Furnas said he had to have his parents co-sign for his student loans, and he knew that if he could not pay them back, that his parents would have to.

“It doesn’t make me feel good that my education could create a financial burden for my parents, especially if I don’t get to finish it out and they still have to pay,” Furnas said.

Rodney Fleming, Managing Attorney of Student Legal Services, explained that if a student died and they had a co-signer for the loan, that it would be that co-signer’s responsibility to pay back the loan after the student died.

The co-signer is saying “you don’t pay back the loan that they will,” Fleming said.

Kerri Rohr, a Consumer Banker for National City Bank, said if there is no co-signer, the protocol depends on who the server – which is the company or person that is funding the student loan through the bank -is for the student loan. There are multiple servers that lend money to students through privatized loans, each of which have their own guidelines and restrictions.

Rohr said the best way to see what actions a student’s lender would take in the case of death is to call their loan server, or contact the U.S Department of Education.

“In most cases the loan can be discharged or forgiven,” Rohr said.

If the loan is not discharged, the procedure for collecting payment is based on the lender and the estate that the student left behind. An estate is anything worth money that a person leaves behind after they die.

Fleming said that in most instances, the lender would take into account whether the borrower had anything in their estate worth money.

The lender then has the right to get a court-ordered inventory of the estate that a student has, such as a car, stocks or a security deposit from a landlord.

After the estate is empty of value, then there is nothing left that the lenders can do to obtain that money, and the debt is basically wiped away.

Rohr said that at that point the loan would be uncollectible and be written off as a loss.

Rohr also said that sometimes families feel obligated to pay off the debt that their deceased left behind, but that they are in no way obligated to do so.

In the case that lenders are left without payment, they can file a claim against the estate, said Jennifer Robeson, office manager for the Wood County Probate Court.

Although these claims are usually filed against people who have to pay back mortgages, car loans or credit card debt, student loans could still be targeted, Robeson said.

“We see many many claims filed against estates, but I have not personally seen one filed because of student loans,” she said.

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