Legal Question in Credit and Debt Law in California
Student Loan Responsibility
My son is insisting I need to take out life insurance on him. He says that he was told by his school financial office that if he should die, I would be responsible for ALL of his student loans, not just the ones I co-signed. I told him I thought his estate might be responsible, but that I did not see how I could be personally be responsible. He is insisting I am wrong and he is right : ) Would love to have a definitive answer on this for his peace of mind (and mine, too), as we are both freaking out on the amount of his student loans in general. Thanks so much for this service!
2 Answers from Attorneys
Re: Student Loan Responsibility
Do not take out life insurance for this reason, student loans are not recoverable from a borrower's relatives after a death. You should also not ever be co-signing anything for anybody.
Re: Student Loan Responsibility
You are only liable for the loans you sign for, not any others. Life insurance might be recommended for the loans that you signed for. When he dies, the loans you did not sign for will have to be paid out of his estate.
If there is not enough money in his estate, the balance of the loans die with him.
The current law is that student loans last for life. Neither bankruptcy nor hardhsip nor disability nor time will end student loans and their compounding interest.
I read an article that some banks are beginning to realize that student loans are a pretty good investment. It is the only loan obligation where compounding interest is allowed and the only debt (other than child support) that lasts for life. It is not uncommon for graduating college students to owe between $150k and $200k in student loans. With interest compounidng, you can bet that those graduates will be impoverished for the rest of their lives. They would have been far better off by never going to college in the first place.
Some politicians are working on legislation to change things. I think that this is an area where the laws do need to change to provide some sort of relief or hope to those owing onerous loans that can never be paid in full.
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