Repurcussions of co-signing a student loan when the borrower dies?
June 7, 2010 7:28 AM Subscribe
I am the co-signer on a modest student loan. The borrower has suddenly and unexpectedly died. What next?
In 2008, as a favor to an acquaintance of mine, I co-signed on a $4000 student loan for him. He was attending a business school, making payments on his loan, working a good job, even dieting/exercising--really on the cusp of turning his life around--when he suddenly and inexplicably died in his sleep a few weeks ago. Kid was 29.
Generally, as the co-signer, should I just plan to make the rest of the payments..? I mean, I knew what I was getting into when I decided to help him out, so I know I might have to eat it, but I figured I'd ask and see if I have any recourse due to the fact he died.
And what, if anything, should I be doing in the meantime? Should I contact the bank, or wait for them to contact me? Should I, after a respectful/reasonable grieving period, contact his family and see if they are willing to honor the loan with the payout of his life insurance policy (or is that a dickhead thing to do?)?
In 2008, as a favor to an acquaintance of mine, I co-signed on a $4000 student loan for him. He was attending a business school, making payments on his loan, working a good job, even dieting/exercising--really on the cusp of turning his life around--when he suddenly and inexplicably died in his sleep a few weeks ago. Kid was 29.
Generally, as the co-signer, should I just plan to make the rest of the payments..? I mean, I knew what I was getting into when I decided to help him out, so I know I might have to eat it, but I figured I'd ask and see if I have any recourse due to the fact he died.
And what, if anything, should I be doing in the meantime? Should I contact the bank, or wait for them to contact me? Should I, after a respectful/reasonable grieving period, contact his family and see if they are willing to honor the loan with the payout of his life insurance policy (or is that a dickhead thing to do?)?
If it's a Title IV loan, then it's discharged upon death.
IANAL etc, but even if that doesn't apply here, it's firstly a probate issue, and I don't see that you need to do anything until that gets resolved. You might want to check with the executor of his estate in reasonable time to see what's happening.
posted by holgate at 7:40 AM on June 7, 2010
IANAL etc, but even if that doesn't apply here, it's firstly a probate issue, and I don't see that you need to do anything until that gets resolved. You might want to check with the executor of his estate in reasonable time to see what's happening.
posted by holgate at 7:40 AM on June 7, 2010
I agree that you should look at a copy of the original loan document and see what stipulations it has for the death of the borrower.
If the document is not clear, I'd consult with an attorney.
But most loan documents I have seen at least mention what happens to the debt in the event of the death of the borrower.
posted by dfriedman at 7:42 AM on June 7, 2010
If the document is not clear, I'd consult with an attorney.
But most loan documents I have seen at least mention what happens to the debt in the event of the death of the borrower.
posted by dfriedman at 7:42 AM on June 7, 2010
I don't know about the particular student loan this person got, but all my co-signers were relieved of any responsibility after I made six monthly payments without missing one. My co-signers are no longer responsible for the loans since I did this.
Check the paperwork on the loan and see if you may have been relieved of responsibility since the person was making steady payments.
posted by zizzle at 7:43 AM on June 7, 2010
Check the paperwork on the loan and see if you may have been relieved of responsibility since the person was making steady payments.
posted by zizzle at 7:43 AM on June 7, 2010
When my son died, his student loans were forgiven. Call the company holding the loans and inform them of the situation, they may ask for a death certificate.
posted by HuronBob at 7:45 AM on June 7, 2010
posted by HuronBob at 7:45 AM on June 7, 2010
Most student loans have a provision for the death of the student or the person who took out the loan, or if the student has been severely disabled in such a way that they can't complete their education. Best bet? Take a look at the Master Promissory Note.
posted by honeybee413 at 8:14 AM on June 7, 2010
posted by honeybee413 at 8:14 AM on June 7, 2010
Response by poster: I have the loan documents; I will check them out... Not certain if it is a Title IV loan, but there was a paragraph in there about death/disability. I'll grab the paperwork when I go home for lunch. Thanks so far, everyone! Will have more info soon.
posted by Jinkeez at 8:30 AM on June 7, 2010
posted by Jinkeez at 8:30 AM on June 7, 2010
Waiting around without knowing what's up is generally a terrible idea from a legal standpoint, IANAL, but my wife is and I've picked up a few things. I second the suggestion to go over the original loan docs, if the debt is discharged upon death then the whole thing is moot. In any event, contact the creditor as it is not really your job to go get the money from the executor of the deceased's estate, it is the job of the creditor. If the creditor doesn't realize anything has happened and waits until the estate is settled (and the debt is still valid) then they'll come get their $4K from you. In NO EVENT should you go calling the grieving family for the 4 grand since it's not even owed to you but to the student loan company.
posted by TeatimeGrommit at 8:31 AM on June 7, 2010 [1 favorite]
posted by TeatimeGrommit at 8:31 AM on June 7, 2010 [1 favorite]
Response by poster: All right, will have to give the bank a call, can't find anything about death/disability so I might be missing more paperwork... It is listed as a "Private Education Undergrad Loan".
posted by Jinkeez at 9:10 AM on June 7, 2010
posted by Jinkeez at 9:10 AM on June 7, 2010
I am not a lawyer nor do I know anything about these loans, but one thing that struck me is that your friend will have an executor taking care of his affairs. There may be assets/insurance, etc that may play a part in this if the loan is not discharged by death.
posted by JohnnyGunn at 9:21 AM on June 7, 2010
posted by JohnnyGunn at 9:21 AM on June 7, 2010
"contact his family and see if they are willing to honor the loan with the payout of his life insurance policy (or is that a dickhead thing to do?)? "
Expecting a life insurance policy to cover the deceased debts isn't a dick move if the beneficiary is the deceased estate; if it's someone else then ya it would.
posted by Mitheral at 9:42 AM on June 7, 2010
Expecting a life insurance policy to cover the deceased debts isn't a dick move if the beneficiary is the deceased estate; if it's someone else then ya it would.
posted by Mitheral at 9:42 AM on June 7, 2010
I'm generally of the opinion that it can hurt to ask, but in this case, even if the deceased's estate isn't the beneficiary for any of his life insurance policies, I don't think it is a dick move for the OP to ask to have the loan paid for out of the proceeds if he'd otherwise be on the hook. Besides, how is the OP supposed to know who the beneficiary is in the first place, and since he's going to need to ask anyway, better that he just explain why.
posted by Good Brain at 10:02 AM on June 7, 2010
posted by Good Brain at 10:02 AM on June 7, 2010
Find out who the executor of his estate is, and make sure the executor knows about this loan. If the executor does a good job at their task, they will try to get the issue wrapped up; if they're lazy, at least you can get a copy of the death certificate from them.
I would probably try to get a copy of the death certificate since basically anything you're going to do about the loan is going to require it.
Unless it's a really bad situation w/r/t family (where life insurance didn't cover funeral or medical expenses or he has dependents who are going to need the insurance money far more than you do), I would say that it's not a dick move at all to pursue getting the debt paid out of the estate. You were a cosigner on a loan that you expected him to pay (and he expected to pay). That strikes me as a very legitimate claim.
Just don't dawdle around notifying the executor of the estate; there may be a deadline for giving notification of claims.
posted by Kadin2048 at 10:19 AM on June 7, 2010 [2 favorites]
I would probably try to get a copy of the death certificate since basically anything you're going to do about the loan is going to require it.
Unless it's a really bad situation w/r/t family (where life insurance didn't cover funeral or medical expenses or he has dependents who are going to need the insurance money far more than you do), I would say that it's not a dick move at all to pursue getting the debt paid out of the estate. You were a cosigner on a loan that you expected him to pay (and he expected to pay). That strikes me as a very legitimate claim.
Just don't dawdle around notifying the executor of the estate; there may be a deadline for giving notification of claims.
posted by Kadin2048 at 10:19 AM on June 7, 2010 [2 favorites]
Response by poster: Oh terrific, I just did some research and discovered that the loan is (1) in default, and (2) in a charge-off status, which apparently means he had NOT been paying, it and now he is boning my credit from beyond the grave. I have never received any calls or letters stating that this debt was in default, so this ought to be fun to untangle.
Thanks, everyone... Will try and figure out who the executor of the estate is; I'm guessing it is perhaps his parents or sister. Bleah.
posted by Jinkeez at 10:32 AM on June 7, 2010
Thanks, everyone... Will try and figure out who the executor of the estate is; I'm guessing it is perhaps his parents or sister. Bleah.
posted by Jinkeez at 10:32 AM on June 7, 2010
This thread is closed to new comments.
If it comes to that, as long as the estate has money to pay off the loan, I don't think that it's unreasonable for you to expect that it do so. However, you might try to find the executor of the estate and talk to that person instead of the family. Although the executor may be a family member, this is the kind of request an executor is supposed to address, while it's not necessarily something that a family member should have to deal with.
Of course, IANYL, and you should consider the laws of your state with respect to these issues by consulting local counsel.
posted by iknowizbirfmark at 7:40 AM on June 7, 2010