Father Stuck With Dead Son’s Student Loans But No One Will Tell Him How Much He Owes

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.

Grieving Father Struggles to Pay Dead Son’s Student Loans [ProPublica]

PREVIOUSLY:
Sallie Mae Opts Not To Go After Family Of Dead Woman For $120K In Student Loans
Why Private Student Loans Are A Dangerous Game
Key Finally Decides Not To Make Family Pay Dead Student’s College Loans

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  1. Warren - aka The Piddler on the Roof says:

    “How much do I owe?”

    “Just keep paying whatever we tell you until you die. Oh, and can we have a list of all your relatives, friends and acquaintances while we have you on the line?”

  2. Loias supports harsher punishments against corporations says:

    Shouldn’t his lawyer have instructed on what to do when they call him? Like record the conversartion and sue them for each instance.

    • somedaysomehow says:

      ^This.

    • ScandalMgr says:

      The OP could use the fines from the debt collectors violation of FCRA (?) to pay the loans, if only his lawyer was comptent.

    • vdestro says:

      I am not a lawyer so not 100% sure of the details but I think private student loans are exempt from a lot of the consumer protections that apply to other types of loans.

      • floyd fan says:

        The loans themselves are exempt from certain protections, but all bill collectors have to abide by the FDCPA, which the debtor can use to collect money from bill collectors if they continue to harass him.

    • jimbo831 says:

      Definitely:

      “”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.'””

      This one is a huge violation of the FDCPA. I’m confused as to what this guy’s lawyer is actually doing? He needs to get a new lawyer and sue these people.

  3. Blueskylaw says:

    “The first one started at Bank of America, but was sold almost immediately to a company called First Marblehead”

    Can someone please explain to me why Bunk of America would buy a loan only to re-sell it immediately? Obviously it’s money, but what is the mechanism? Also, if debt collectors are trying to collect, then I’m assuming that the current debt owner hired them so why can’t they say who the current owners are and maybe a “range” of what they owe?

    • Jane_Gage says:

      I teach art and I’m not very bright, but I’ll take a shot at it. They bought the loan for 5,300 and then sold it for 6,500. It may only represent a fraction of the interest and original amount eventually to be collected, but when retail job dad defaults because his wife needs open heart surgery, the buyer will have assumed all the risk.

    • Coffee says:

      Ding! What Jane said…this is actually really common, and it’s the principle that led to the collapse of the mortgage market. Banks weren’t actually holding onto home loans. They would get as many as they could, have them stamped as an A+++ investment, and immediately flip them to investors for a tidy profit. Because the loans were sold, there was no actual risk on the part of the bank, and therefore no risk-assessment when signing people up for loans. Who cares? WE’LL JUST SELL IT TOMORROW ANYWAY.

    • vnlindstrom says:

      It all has to do with actuarial likelihood of default. So when Freddy died, tragically, a computer program pushed the account into a high-risk group, which BofA (the original lender) packaged and sold for whatever they could get. And the second company sold, and so on, and so on. Probably not until the vultures bought Freddy’s file for less than a penny on the dollar did a human being look at his file, and by that point, the owner didn’t care.

      As to your second question, they are required to disclose all of this information in writing…but if you know debt collectors, many have been known to essentially threaten you with all the things they could do to your credit etc. while you’re waiting the full statutory period for the info you request. I think he’s done the right thing by hiring a (not too aggressive) lawyer and getting the media attention.

    • Oranges w/ Cheese says:

      When I purchased my house, there was a paper IN MY CLOSING DOCUMENTS that said “We are selling this loan to Fanny May – OK?” I didn’t even HAVE the loan yet and they had sold it.

  4. PLATTWORX says:

    Public attention to this story should make those loan vanish.

    That said, the OP should not be answering the phone when these creditors call. He has told them to call his lawyer once. He is done communicating with them.

  5. Marlin says:

    Stop paying and make them produce not only the amount but also the proper paperwork in court.

    If not never pay again and keep going on with life. If you only make 21k a year I doubt he has much to come after.

    Also if his lawyer was worth a damm he sue the collectors for breaking federal law.

    • Loias supports harsher punishments against corporations says:

      Yep, at 21k he can apply to income-based repayments, which would put his amount owed to roughly $0 until the 20-year forgiveness period hits. I know because that’s what my fiance has been doing.

      • Nigerian prince looking for business partner says:

        Do private loans have income based payments? Mine were all through Citibank and I don’t recall that ever being an option.

        • Fast Eddie Eats Bagels says:

          Don’t E-smack me for asking this, but can’t you file for bankruptcy on private student loans if need be?

          • Nigerian prince looking for business partner says:
          • ColoradoShark says:

            Incredibly, the answer is no. It is very rare to be able to discharge a student loan, even a private student loan in bankruptcy.

            Now let’s assume you are a predatory lender (but I repeat myself): How would you loan your money? In a way where it might go away in bankruptcy, or in a way that pretty much can never go away?

            • FatLynn says:

              But you also have to remember the historical reason for this: people would pay their way through med school, for example, declare bankruptcy, discharge loans, and go about their business making six figures.

              I don’t think that “no discharge ever” is the right answer, necessarily, but “easily discharged in bankruptcy” wasn’t working. There has to be some sort of middle ground.

              • OutPastPluto says:

                Nonsense. There’s no reason to strip everyone’s rights just because a few people figured out how to game the system.

                Your kind of thinking will end up getting us all put back into serfdom, a little bit at a time.

                • Robert Nagel says:

                  It was more than a few. If the practice wasn’t stopped no one would have been able to get a loan. Maybe a low cost term insurance policy might be a good investment for the guarantor. At that age figure on $100 per hundred thousand dollars of insurance.

              • Sound Money Girl says:

                A sort of historical reason. There were actually only a few cases of this happening, but the industry used it as an excuse to push Congress to outlaw the practice. Congress, as they usually do, rolled over without investigating just how often this really happened.

        • Loias supports harsher punishments against corporations says:

          Ohhh, you’re right. Yup, totally screwed. Fiance still pays hundreds/month on her private loans.

          • Stickdude says:

            Here’s the relevant part of the law:

            (a) A discharge under section 727, 1141, 1228 (a), 1228 (b), or 1328 (b) of this title does not discharge an individual debtor from any debt—

            (8) unless excepting such debt from discharge under this paragraph would impose an undue hardship on the debtor and the debtor’s dependents, for—
            (A)
            (i) an educational benefit overpayment or loan made, insured, or guaranteed by a governmental unit, or made under any program funded in whole or in part by a governmental unit or nonprofit institution; or
            (ii) an obligation to repay funds received as an educational benefit, scholarship, or stipend; or
            (B) any other educational loan that is a qualified education loan, as defined in section 221(d)(1) of the Internal Revenue Code of 1986, incurred by a debtor who is an individual;

            Given his income and the fact that the loan wasn’t for him, I think he’d at least have a chance at making a case for “undue hardship” discharge.

      • mikesanerd says:

        You can’t do income-based repayment OR go bankrupt for private loans. That’s what really sucks about them. You’ve got absolutely no options. Bankruptcy lawyers and such won’t even talk to you once they find out your debt is private student loans. (Of course, the law changes very frequently, so this probably doesn’t apply to everyone out there who has such loans.) My wife has a bunch of them, and her story is just like the above, except that no one died.

  6. Coffee says:

    He should be asking the collectors not to call him, suing them when they do, then asking them to apply any future judgments against themselves to the balance of the loan. Easy-peasy! o/

    • GearheadGeek says:

      This. The debt collectors are legally bound to deal with the lawyer once he told them to do so, and I suspect they’re in violation of the FDCPA when they continue to hound him.

  7. Harry Greek says:

    ‘The lawyer doesn’t owe us. You’re the one who owes us. You’re the one who has to pay us.’

    Great tough guy. Now, tell the man what he owes.

    • Warren - aka The Piddler on the Roof says:

      Or better yet, tell me where your office is — I’ll bring you a check personally.

      *picks up flame thrower*

  8. GMFish says:

    Have your attorney file a lawsuit for declaratory relief and name as many interested parties as you can. File a motion for summary disposition saying that nothing is owed. Make them prove that it is owed and how much. If they can’t do that, you win.

  9. jayphat says:

    It really should be illegal to sell off individual debt except in instances of total company buyouts. Honest to god, its become so messy and unregulated, that you can’t even figure out who to pay. And this has become the norm.

    • mikesanerd says:

      Definitely agree. If companies are going to shift the loans around the way they do, there needs to be one central location where you can go to get your info and make your payments, regardless of who holds the loan. To the consumer, all this “who owns the loan” crap should be behind the scenes.

      • Costner says:

        They tried that “one central location” idea with mortgages…. it didn’t end well. There are lawsuits, claims of falsified documentation, missing paperwork, claims the paperwork on file doens’t match the original, missing signatures, missing deed paperwork etc, etc.

        It is a gigantic mess. I agree something like that should exist and it should be easier than what they make it, but it doesn’t seem these institutions are capable of handling it themselves. I’m not sure what the alternative is… a government agency who monitors it? That would probably raise just as many eyebrows as the convoluted system the banks try to manage themselves.

    • varro says:

      Reinstitute dischargeability of student loan debt in bankruptcy after a certain period – 7 years for the borrower and 1 year on cosigners – and make any student loans assigned to another entity besides the original lender automatically dischargeable.

    • quieterhue says:

      At the very least, they should be required to provide notice to the loan holder each time the loan is sold.

      • jayphat says:

        Im not even talking just loans. Say you default on a loan(credit card, personal, whatever). They should send you some form of notice “we wrote this off and sold the debt to Incompetent Debt Collection, INC”. That way you know when/who it was sold and know who the hell you’re supposed to be dealing with.

    • Derek Balling says:

      You don’t have to figure it out. Until the “new debt holder” produces copies of the legally binding documentation that says “they now hold the debt”, keep paying the original debt holder.

      The burden is on the debt-holder to prove that they are the person you should now be paying, not on you to go chasing after people to figure out who to pay.

      • Yorick says:

        Once upon a time I was unable to pay my present bills, let alone my debts. Time passed. I had one debt I couldn’t find out who owned. SoL has long gone by, I still don’t know. And the one time I was ever contacted about it by a lawyer, he wouldn’t tell me.

  10. CosmosHuman says:

    I will be entering grad school soon and will need loans and will try to avoid any private loans if possible. I will probably pass away before I finish paying off my loans. I am not joking here. I am going back to school so I can make myself a better candidate in the current sucky job market.

    I have good credit now and hopefully won’t need a co-signer, as I don’t have anyone alive who can assist me.

    If I do well, I plan on going for a PhD. I have all the time in the world now.

    • FatLynn says:

      I don’t know what field you are in, but something to consider:

      If you apply as a PhD student, you may be able to get funded as a TA/RA/GA. If, after two years, you decide the PhD isn’t for you, you can probably take the master’s and get out of there. This will piss off your adviser, but less so if you can come up with a legitimate reason for it (marriage, relocation, etc.) that makes it look like it wasn’t your plan all along. It depends on the structure of your program and some other stuff, as well, but if you are currently thinking “hm, maybe I want the PhD”, you should give some very serious thought to being a PhD student.

      • CosmosHuman says:

        I have no interest in commuting fraud, but I want to peruse research in my field. I have experience in my field. Just let me get through grad school first, then I will decide. I was just kidding about never being able to pay the loans off. I will have to the income sensitive repayments.

    • Sassenach says:

      If the amount of money you have to borrow will never be paid off in your lifetime, then the degree you’re going after isn’t worth it. How about getting training in something that offers a high enough income to justify the investment?

    • toodarnloud says:

      Consider maxing out a bunch of credit cards to live on, then declaring bankruptcy after you graduate.

  11. CrazyEyed says:

    “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”

    Only thing that doesn’t make sense to me was the fact that he doesn’t know how much he co-signed for on the second loan and needs to research credit extended. Unless he didn’t co-sign for the 2nd loan, I’d say F*** it.

  12. CosmosHuman says:

    I would suggest to the father to get a new phone number; maybe a burn (cell) phone, and not give out his number to anyone. Also sign up for a free Google voice mail.

    • cyberpenguin says:

      Why? If he records the calls and the lawyer does his job and notifies the creditor, or the creditor refuses to provide contact information he can get $1,000 minimum per call.

      Properly documenting their activities could pay off the loans and result in a tidy little payout.

      • CosmosHuman says:

        Bill collectors don’t give a damn about the law, if they can’t collect the money, they re-package the amount and sell it for pennies on the dollar to another agency.

        I have an ex-friend who used to hound people for the debts owed. They skirted the law all the time. YouTube has plenty of videos of abusive collectors. Sorry, i can’t give you a link, but you can search.

        • frodolives35 says:

          This. Its all a ring around the debt collector scam with each one adding fees etc. I wonder how much they get to write off in taxes as bad debt like this.

  13. kataisa says:

    Do what people facing foreclosure did and demand the banks/collection agency show you the student loan note.

  14. SPOON - now with Forkin attitude says:

    because fu.

  15. cbatt says:

    Unless he co-signed the loan I’d just tell them to pound sand and stop answering when they call. Many modern phone services will also let you easily block certain callers so the phone doesn’t even ring. If they try to ding his credit then you can easily dispute it.

    • Torgonius wants an edit button says:

      “Because he co-signed on his son’s loan, he is now fully liable for the total loan amount.”

      I will assume that his lawyer has already done the whole certified letter deal, and instructed the creditor to work with him. If they failed to do that, then I hope they get justiced hard and long, sans lube.

      This guy needs to be documenting the living hell out of all the calls and passing this on to his lawyer. Law dog could be in for a sweet payday when the dust settles.

  16. Cooneymike says:

    Parts of this don’t make sense. As a represented party it is easy for his attorney to bring quick sanctions actions that essentially pay for themselves under FDCA to shut these annoying guys down. Sure the first one or two aren’t worth it but it sounds like more than that here. If the same firm does it over and over it gets really profitable and may even touch on punative damages.

    Sure, once you do this you move things into the potential litigation realm but isn’t he essentially there as well? Moreover, in order to litigate someone is going to have to sign their name, under oath, that they own the loan and how much they in good faith believe it to be.

  17. benminer says:

    How is that somebody who makes $21,000 a year was able to co-sign on a loan?

    • VintageLydia says:

      You can make only 21K and still have good credit. It’s hard as hell to live within your means when you have a family making that much, but it’s possible, especially if you take food stamps and stuff.

  18. SacraBos says:

    “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.”

    Well, when that company wants to reveal itself, and how much is owed, we’ll talk.

    I think many other commenters are right, but the time you have fun with the FDCPA violations, you may not owe anything.

  19. Shtetl G says:

    Its too late for the OP now but if anyone else is reading this and is going to cosign a college loan for their kids, make sure you buy a life insurance policy for your kid. It may sound cold but not as cold as having to pay your dead child’s debt for the next 20 years.

    • Stickdude says:

      This.

      If the student dies, the loan will be paid off.

      If the student lives but doesn’t pay on the loan, you simply remind them that you have a life insurance policy on them… :)

  20. dvdcowboy says:

    1. Get your free annual credit reports.
    That will tell you what you owe and to who.

    2. visit debtorboards.com, great resource on how to deal with creditors.

  21. scurvycapn says:

    Ah, ACS… I’m currently working on a project with them (not the educational division) and yeah… If the different departments work the same way, don’t expect much timeliness out of them.

  22. Lyn Torden says:

    The gardener’s attorney needs to study up on both Rule Interpleader (FRCP 22) and Statutory Interpleader (28 USC 1335). The apparent dollar amount qualifies under both. Joinder is valid even if plaintiff denies any and all liability. Joinder required defendants to interplead, which pretty much forces the defendants to reveal the claimed amount.

  23. Oranges w/ Cheese says:

    As much as this sucks, THIS IS WHY YOU DON’T COSIGN ON LOANS.

  24. One-Eyed Jack says:

    FDCPA / FCRA? Cease & Desist “never contact me again” letter? Then sue their pants off for violations of the above.

    Also, kudos to the person who said if you’re co-signing, you better get a life insurance policy on the primary loan holder. Good tip. Better tip: Don’t co-sign.

  25. Alessar says:

    Loans shouldn’t be so freely salable; there should be a requirement that upon transfer of the loan, the receiver has to issue some kind of white sheet outlining exactly what the purchasing company name and contact information is, as well as explicitly document the balance of the loan and terms at that moment. Seriously, what is to prevent a 5th company up the chain from simply screwing up and imputting the wrong $ owed into their system (decimal error, for instance)? The consumer should be protected by an explicit paper trail.

  26. MikeVx says:

    I know it doesn’t really apply to this, but the history of my mortgage references a point made earlier in this discussion. My mortgage was sold three times over the course of paying it off. In each case, the selling holder sent me a letter identifying the new holder to whom the loan was being sold, provided account numbers, and a guarantee that up to X payments (this was different each time) would be forwarded from the old holder to the new one to cover notification delays and such. Even Wells-Fargo gave me all this information when they were selling off my auto loan. Not that it mattered as I had just mailed a payoff the previous day. If WF, whom I regard as the world leader in financial incompetence (I could tell you some horror stories about the course of my auto loan, never again WF) could manage this, it should be within the capabilities of a tree toad.

    The victim here should insist that the current holders first prove they own the loan, the proof must consist of all contracts and transfer documentation relating to the account all the way back to the original holder. Insist that no confidentiality excuse is permitted for not producing a contract, and that if they can’t produce the contract chain, they don’t own the loan, are not permitted to attempt further collection, and are not permitted to sell the debt on, with a reminder that the law has specific terms relating to the sale of things you don’t own. If proof is provided, he should then insist on a complete history of the account, and a reset to the state just after the last payment made by his son. They are not providing information, this carries the risk that they have no ownership of the debt and if he pays anything he runs the risk of being the victim of fraud. The reset condition should be tied to the original contracted payment rules.

  27. edububble says:

    Gosh, what a scummy business.

  28. Derek Balling says:

    This seems simple to me:

    - The Fair Debt Collection Practices law means that if he’s told them to go to his lawyer, they’re required to talk to his lawyer, and violating that means (in many cases) the judge will simply void the debt as punishment.

    - Further, insist before paying anyone that they document that they are the holder of the debt, and the amount of the debt. They’re legally required to do this.

    - If anyone puts something negative on his credit report, report it (along with the info above about not being able to validate the debt) to the credit reporting agency to have it removed.

  29. chargernj says:

    Seems to me that when a loan is sold to another company they should lose the bankruptcy protection that student loans currently enjoy. I know that the law doesn’t work like that, but it should.

  30. Ayanami says:

    I’ve been through this myself, it took about 6 months to track down the loans. There should be a requirement that you re informed whenever the loan is sold, or maybe just get rid of the practice of selling loans altogether.