While federal student loans are forgiven if the student dies before the money is repaid, lenders of private student loans can choose to forgive the debt or go after a co-signer for the money. And just like mortgages, private student loans are bundled and re-sold again and again, leaving some parents struggling to figure out how much they owe on their deceased child’s student loan — all while being hounded by debt collectors.
ProPublica has the story of a gardener in California who is trying to support his family on his salary of $21,000, while at the same time attempting to pay down the private student loan left in his lap when his son passed away a few months after graduating college in 2008.
Because he co-signed on his son’s loan, he is now fully liable for the total loan amount.
But even with the help of a lawyer, the father hasn’t been able to get a handle on just how large the loan is, or even who currently holds the loan.
Meanwhile, even though the debt collectors are legally required to go through his attorney, the father says he continued to be hounded directly by collection agencies.
“I would tell them to call the lawyer,” he told ProPublica. “And they would still say, ‘The lawyer doesn’t owe us. You’re the one who owes us. You’re the one who has to pay us.’”
He says he and his lawyer have sent copies of his son’s death certificate to every company that has contacted him about the loans, but generally to no avail. One company said someone would contact him to come up with a solution, but no one ever called.
ProPublica tried to figure out who currently owns the late son’s loans. The first one started at Bank of America, but was sold almost immediately to a company called First Marblehead, but all of the paperwork says National Collegiate Trust, which is apparently the name First Marblehead uses for bundled loans that have turned into securities and sold to investors. However, ProPublica says no one at First Marblehead responded to the site’s comment requests.
The other loan began with the now-bankrupt Education Finance Partners, which was paid a $2.5 million settlement in 2007 over allegations it paid colleges to push students toward its high-interest loans.
Company archives show that this particular loan was among those picked up by UBS in 2008, only to change hands again in 2009 in a sale the bank says “was private, it was bound by a confidentiality agreement and, therefore, we’re not in a position to disclose the identity of the purchaser.”
The first loan from Bank of America was only for around $7,400. But the father in the ProPublica story can’t seem to find out how much is owed on the other, much larger loan. One document shows that $160,000 in credit had been extended to the son, and that if he made all his payments as scheduled, he would have paid a total of $279,000 in the end.
The loan’s current servicer — ACS Education Services — is obligated to reveal this amount, but the father is having trouble getting the truth out of the company, a subsidiary of Xerox.
ProPublica attempted to find out more, but ACS wouldn’t divulge specifics with the site, even though the father had given his consent. The site also tried contacting Xerox, hoping someone at the parent company might be able to help. But after more than a week, the company has yet to respond.
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