Grieving parents crushed by daughter’s $200,000 in student loans

NEW YORK (CNNMoney) – 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.”

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12 comments

  • Mrjkv

    So why is this news.her parents co- signed for the loan..she died now they feel cause she’s dead they should not have to pay it back..it should be for all parents .make sure your kids go to a school they can afford and never co-sign. for any loan

  • Diana

    Let this be a lesson to parents – don’t co-sign loans for your kids. School loans should NEVER be allowed to file bankruptcy one. If that happens no one will pay the loan back.

  • Sarah

    My father consigned a loan for me and then took a life insurance policy on me with him as the benefactor it’s a little bit of extra money that could have gone a long way had I died before I paid off the loan

  • D Wolfe

    I get so frustrated with people who use debt that THEY took on to victimize themselves. $200,000 for nursing school? Sounds like “splurging” to me. Why in the world is his stupidity any one’s fault but his own?

    • Anonomys

      No, $100,000 for Nursing School that over the past 5 years with fees and penalties is now up to $200,000.

  • melv12

    Though I don’t recommend consigning for loans, I know most parents (including mine), will do so for student loans! If you do so, take out a life insurance policy in the amount of the loan on the student! It is cheap and when your taking that risk, it’s necessary!

  • Tina Taylor

    student loans, like other loans, should be allowed to sell insurance on the loan. I have bought this on previous car loans- had I died before the loan were paid off, the family would have been able to keep the car without the debt.

  • Kimberly Fenton

    Wow, some pastor! You co-signed pay it! You should have immediately taken what money you had in savings and your retirement and paid her bill then you wouldn’t owe them anything. Good grief they are practically giving you a free ride anyways. YOUR kid spent $100.000 and they reduced it to $27,000 and your still complaining. Do what’s right your suppose to be a man of GOD. When you screw people over it cost others more for their education. I had no clue Pastors made that kind of money, good grief, and on top of that your wife brings in even more. PAY YOUR BILLS and quite whining. Everyone has to pay their bills the best way they can, and most people don’t bring in close to $100,000. A vacation, LOL, I can’t even believe with what you owe in bills you would even be thinking about a vacation.

    • Anonomys

      Go back and read the story again, maybe slower……..No, his wife does not make more than him, she brings in almost nothing. What isn’t in the story, he used a great deal of his retirement (this being before his daughters passing) to help members of his congregation, he also used part to live off of when he stopped taking a salary, because his church members couldn’t keep the church bills paid, due to so much job loss. Plus, they are now raising their 3 grandchildren. Show some compassion for not just this family, but for the many others that have to struggle with taking on the debt of deceased family members. I could continue, but I won’t.

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