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Parents face $200k in student loans after daughter’s death

Grieving parents hit with $200,000 in student loans

New York — When his 27-year old daughter Lisa died suddenly of liver failure five years ago, Steve Mason was as devastated as any father would be.

He and his wife Darnelle immediately took in Lisa’s three children — ages 4, 7 and 9 at the time — even though they knew it would be a huge struggle to support them. Steve earns less than $75,000 per year as a pastor, while Darnelle earns even less as a director at the same church.

Then the student loan bills started coming.

Mason had co-signed on the $100,000 in private student loans that his daughter took out for nursing school, and the lenders wanted their money.

Unable to keep up with the monthly payments on top of all of the other mounting expenses, the $100,000 balance ballooned into $200,000 as a result of late penalties and interest rates of as high as 12%.

“It’s just impossible on a pastor’s salary raising three kids to pay $2,000 a month on loans,” said Mason, who has been searching for a second job.

If these had been federal student loans, Mason could have had the loans discharged or at least received some sort of financial assistance. But since they are private loans, he has little to no recourse.

He called each lender to explain his situation and beg for help, and while they sympathized with him, they told him they weren’t required to do anything.

And they’re right — private lenders aren’t bound by any federal requirements to help borrowers — or co-signers — facing financial hardship, even when it’s a parent whose child has passed away, says Deanne Loonin, an attorney at the National Consumer Law Center. Any loan forgiveness is up to the discretion of an individual lender.

Navient Corp., which manages several of Mason’s loans, said it has reduced the balance and lowered interest rates and payments for Mason in the past, and provides relief to customers on a case-by-case basis.

“We extend our deepest sympathies to the Mason family on the loss of their daughter,” the company said in a statement to CNNMoney. “We’re reaching out to Mr. Mason to offer further assistance as appropriate.”

After being contacted by CNNMoney, Mason said Navient lowered his interest rate to 0% on three of four loans and reduced the total amount owed to $27,000 from nearly $35,000.

American Education Services, which handles the bulk of Mason’s other loans, said as a loan servicer it’s in charge of collecting payments and doesn’t make the rules about forgiveness. Mason would therefore need to contact the original lender, National Collegiate Trust, directly. He did this, and says the lender refused to provide him with any relief. NCT could not be reached for comment.

Mason has considered declaring bankruptcy, but student loans are the only type of debt that generally can’t be discharged through bankruptcy.

“People with other debt from splurging — they can discharge that,” he said. “Student loans should really be the one type of debt they do discharge because it’s done to further an education and career. But somehow getting [my daughter] an education has encumbered me for the rest of my life.”

Similar financial nightmares are haunting other grieving families.

Angela Smith, a mother from Chesapeake, Va., filed a petition on Change.org several years ago asking private loan provider First Marblehead Corp. to forgive the $40,000 in student loans that her husband had co-signed for their son Donte, who was shot to death in 2008.

“Shortly after Donte died, that’s when the collection calls started. It was like a punch in the gut — we didn’t know what hit us,” Smith wrote in the petition. “All of a sudden we not only had to deal with the police and attorneys investigating his murder, but we also had to deal with collectors constantly calling and reminding us of our son’s death in the worst way.”

The petition received more than 150,000 signatures from sympathizers but no action from the lenders. First Marblehead didn’t respond to a request for comment, and Smith says the loan was recently sold to another company.

At least four other petitions from families in this situation have been started on Change.org. There’s been one success story so far, where the brother of a deceased borrower petitioned a bank to stop going after his grieving father for payments, and the loan was forgiven.

Legislation aiming to help people in these situations, including recent bills that would allow student loan debt to be discharged in bankruptcy, have been introduced over the years but have yet to pass in Congress.

For now, the only option parents really have is to propose a payment plan with the lender or try to prove undue financial hardship to the courts in order to get the debts discharged in bankruptcy — which is rarely approved, said Loonin. And for anyone not already in this terrible situation, be very wary of taking out private loans — always try to get as much federal aid as possible first.

As he approaches 60, Mason’s dreams of retirement have been shattered. He’s done the math, and he will have dependent children living under his roof until he is almost 70 years old. He hasn’t taken a vacation with his wife since his daughter died, and doesn’t realistically see that happening for many years to come.

“We’ve pretty much gone through our retirement [funds] already — we didn’t have a lot saved to begin with and now any extra money goes to the kids, as it should, and then whatever we can pay on the loans, we do,” said Mason. “At my stage of life, I should have a very different lifestyle than I do.”

Trademark and Copyright 2014 Cable News Network, Inc., a Time Warner Company. All rights reserved.


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18 comments

    • Andrew

      Really?… You do realize that if you don’t get a cosigner for loans, you won’t be able to go to college, right? I HAD to have a cosigner if I wanted to go to college. Even graduate students (if their program does not have a tuition waiver and stipend, like mine) need a cosigner. No college degree? No career. It’s a catch 22. Think it through first.

  • John

    This is why you can no longer sign for loans. This also happened to a friend of mine that signed for his kid and the kid just had to go to a top school. The loans were $150,000+ The kid decided he just couldn’t pay them from his salary. My friend took out a second mortgage to pay them off. It caused him to work way into his late 60’s before retirement. This is happening more and more. I refused to sign for my kids. I told them to pay as they go. My daughter finished at a state school and got a great nursing job with no outstanding debt. She graduated in 4 years and summers by working part time. My wife and I got our degrees with no debt by working and attending maybe not the top schools or private schools, but great state schools. The private schools are ripping everyone off, the student (lousy degree=no job) and the parents who foot the bill. The financial managers are saying this is one of the biggest reasons people can’t retire well. As older folks we have less years to acquire the wealth to pay of school loans. Young folks have their whole lives to acquire the wealth.
    Advice to parents with college bound kids. Grow a pair and tell them to go to cheaper schools, work while they attend and give them money as you can afford each month to help. Don’t sign any loans! If you can’t afford to pay off the loan right away, don’t sign for it now. Help them graduate with no debt and a sense of a work ethic.
    It is the second biggest mistake of retirement!!

    • Andrew

      Uh, I went to a state school and my loans are almost at $100,000 just for undergrad. The University of Illinois at Urbana-Champaign is EXPENSIVE!

  • Nicole

    If they are private loans and you stop paying on them they will eventually go into collections, like a credit card and call with a settlement for less then half of what you owe. I am not saying this is right or won’t hurt your credit for a while but you have to do what’s right for you. When I graduated I had to do this due to the high payments and I got it lowered from $65,000 to $25,000 and my credit is now back up and I am debt free.

    • JMR

      Generally speaking you shouldn’t co-sign a loan for ANYONE, but if you absolutely feel the need, for God’s sake get some life insurance on them. A woman with three young kids and no dad in the picture ABSOLUTELY should have had life insurance. I feel really badly for them, and certainly hope they’re able to work something out, but this could have been avoided fairly easily with some very basic financial planning. Term life is pretty cheap. Why isn’t basic financial planning a required course in every single high school in the USA? Maybe we should make it so that part of the process of securing a co-signed loan is providing proof that life insurance exists for both parties, to protect people from themselves.

  • Christie

    As a parent with 2 kids in college, I have cosigned student loans with the hopes that my kids will get good jobs when they graduate college and then they will be able to pay back their loans, If I didn’t cosign, my kids would not have been able to go to college. With that being said, I also took out life insurance, just in case. Our system is screwed up! The government will allow me to take a Parent Plus Loan to pay for my children’s education, but my children can’t get the loan without me. And the interest rates are between 7%-8% for most loans. Interest on these loans is outrageous. By the time a student graduates, the interest that has accrued is outrageous. I sympathize with these parents. They were only trying to help their daughter make a better life for herself and now they are stuck with these loans due to her death. These loans should have mandatory life insurance policies.

  • jbeegg

    For those of you who say parents should never cosign a childs loan, shame on you. I took out government loans for college and it was not enought. Mind you, i went to a cheap state college. If it weren’t for my parents, i would have had loans higher interest on my loan. After graduating college, obtaining a great job, and waiting for the interest rates to drop, I took out a personal loan and paid the loan off in my parents name. To say the parents should have taken life insurance out is easier said than done. When your child is off to college to better themselves, all you care about is them and their future. If anything happened to me and my parents took on my debt, they would never have any regrets. A parent should want to give their child as much as they could and when I have children, i sure as hell will pay for their college or co-sign any loan to help them. I know people whose parents wouldnt help with loans and it took them years to graduate college and it put their life on hold because they couldn’t afford school. Had their parents helped, they’d be done with school and done paying for loans by now instead of only finishing their degree.

  • BigTexun

    Always, always, always maintain enough life insurance to cover your debts. Co-signers, work that into your agreement with the person you are helping.

    But most important of all, DON’T CO-SIGN IF YOU ARE UNWILLING OR UNABLE TO PAY! The reason you are co-signing is that you are agreeing to pay the loan if the person taking the loan fails in any way whatsoever. If that is not what you intend to do, then don’t sign.

    I feel for you and your family in this time of loss. However your daughter took the money and spent it, and you agreed to repay it.

  • Andrew

    I am SICK of seeing heartless comments on here. Just SHUT UP. You’re not a big shot just because you can say crap about people on the internet. Hell, you’re not a big shot if you say it in real life, either. No one cares, idiots.

  • SIDNEY

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