What I think Fred, is that if we are going to charge $40,000 to $50,000 a year for college, then banks should make education loans to students. They should not boast that they are offering "student loans" when in effect they are offering "family loans."
Let the student incur the debt without a cosigner, based on the alleged value of his education. Should he die before the loan is paid, then it would be paid from the proceeds of his estate, if in fact he had one. Otherwise, it would be discharged like any other debt of a deceased person.
As for the car, the cosigner can recover the vehicle -- use it, sell it, whatever -- and get back at least a portion of her investment. If the cosigner allowed the kid to buy a car without getting adequate insurance, then she is, simply, stupid and beyond the scope of this conversation.
Unless someone comes up with a way to suck the knowledge out of a brain after death and then sell it, the cosigner on a student (family) loan has nothing to mitigate her loss if the primary borrower dies.
And lastly, I don't understand your government references. The loans we are discussing are privately made by banks -- the government has nothing to do with them. You do not need a cosigner on a government loan, so when a student dies, they are discharged the way I explained above because students generally do not leave much in their estates.
@Noreen. I was just wondering. What would you suggest a bank to do in the following situation.
A college student was fortunate and received a full scholarship to a college that wanted him to play basketball. However, he needed a car to get to school so his mother co-signed for a loan and he bought the car.
Unfortunately, he ended up in a coma for two years and then died as a result of an accident that totalled the car. He had liability insurance but no collision.
His mother refused to pay the loan because she needed the money for other necessities (she had a second child who was medically indigent). Should the bank cancel the loan?
To suggest that money spent for education and health is different from money spent for food and transportation ignores the fact that there is a range in all expenditures from bare necessity to luxury. There are some who spend nothing on some necessities and a lot on video games and ipads. Should the government determine how much we spend on everything and provide mandates?
Should the government decide that an education at Harvard is more valuable than one at Hillsdale? Just where do we take a stand?
@Noreen
I'm sure a lot of people tapped the college savings and/or student loans to ease the pain during the recession.
Not only that but I have avoided college savings account because of crappy performance. Many of the college savings plans offer only a handful of funds, most of which are down or barely up after a five year period -- make you wonder why they even exist. I'd rather remain flexible with any spare cash and be able to deploy it into more options that aren't available with the college plans.
It isn't. But what if the ex-student took cash advances in a bunch of credit cards and paid off the student loan debt? Would the credit card debt be discharged in a bankruptcy filing?
Loans survive bankruptcy
tokyogai
5/1/2012 10:02:28 AM
Not only do these loans sometimes survive death ( or at least try to) they also survive bankruptcy. If a student gets a loan, then gets a job only to lose it in a few years, they are in serious trouble. If the situation requires going bankrupt, all debts can either be written off or written down- except for student loans. Doesn't seem fair.
Re: May 1 is decision day
mInvestor
4/30/2012 11:23:36 PM
@Broadway,
That's exact questions I am wondering. While all those Asian countries willing to spend billions to educate their kids or send kids to developed countries, we are here struggling on student loans. And people here are complaining jobs shipped to those countries. Really don't know what to say.
Re: May 1 is decision day
Broadway
4/30/2012 9:50:23 PM
@noreen, that's a sad but interesting question, and one that probably should be looked into. We might get a more complete picture of how bad things are out there. Plus, how many kids were forced to keep working at their crap part-time jobs and opt for part-time community college instead of that 4-year program they got into, because of their parents' fiscal issues?
I wonder how many people had to tap college savings accounts just to keep a roof over their kids heads during the recession.
Thanks PC...forgot about that May 1 deadline. Wonder how many kids and parents are having last minute negotiations over the choice of school.
Re: May 1 is decision day
mInvestor
4/30/2012 8:54:33 PM
Great post thank to Noreen.
I'd be surprised that many students and their family never paid much attention to those details. Even more surprised to see so many families never did any plan and preparation for college education. That's one of many reasons that student loan is so much messed up. It's also shame those loan companies taking advantage of this situation.
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