Student loans are notoriously tough to get away from: Many are immune to bankruptcy, default, and as it turns out, death. As of now, co-signers could be forced to pay off the remainder of debt on private loans if the principal borrower dies with debt outstanding.

A recent Wall Street Journal story brought to light the unfortunate case of one New Jersey family that will end up making more than $85,000 in student loan payments for their son, who died at 25 with loans outstanding. The government is taking steps toward eliminating the loopholes in student lending laws that currently allow private lenders to collect from co-signers, even after the principal borrower has died.

Borrower Protection Act in the Works

The Christopher Bryski Student Loan Protection Act, named after the New Jersey man who died, would “require additional disclosures and protections for students and co-signers with respect to student loans,” according to The proposal, officially raised in May by U.S. Rep. John Adler (D-NJ), would require more disclosure on the part of private lending agencies.

If the act were to pass, private lenders would be required to “clearly and concisely” inform co-signers of their obligations regarding the loan. The act would not force lenders to forgive loans, but it would offer potential borrowers an accurate look at what they can expect from the terms of their loans.

Making Private Loans More Transparent

Not all student loans are created equal in terms of co-signer forgiveness.

Federal student loans may be deferred and eventually refunded if a co-signer or family member submits a note explaining the situation. Privately funded loans are much more difficult to ditch. Companies such as Sallie Mae, Citigroup and Wells Fargo would be among those to face tougher disclosure restrictions under the Bryski Student Loan Protection Act. It should be noted that Sallie Mae’s Smart Option Student Loan does offer co-signers forgiveness in the case of death.

What do you think about the student loan situation? Leave your thoughts in the comments section.

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  • 2009wanderer

    Six mo. ago my husband found a bling on his gold star credit report. Long story short, my daughter (his step-daughter) has my name as a co-signer ??? I have no memorie of signing ??? Of course, since this loan is almost twenty years old, who can remember everyting we ever signed!! They did not have it notarized, nor do they have any form of identification. No drivers license or SS #….now they say I have to prove it is not me rather than they proving it is. They are now saying they will take it out of my meger SS payments at the rate of 15% ea. month!!! Since the Int. is 10% I will still be paying when I die. If I did sign for it I could have payed the principle very easily back then…I was earning a living !!! Today I am 74yr. old living on very, very little. They have let the Int. accrue for twenty years without ever letting me know it was in defautl. There was only one payment ever made!!! And I have no way of knowing if I did or did not sign such a paper !!! My husband also, has no memory of such a loan…I had paid for four years of college and cannot imagine doing so….but then again who knows ??? If I did sign, it still begs the question, can they never notifey me and then demand I pay 10% for twenty years. This is making me ill and I can’t afford an attorney. Any ideas about how to handle this problem would be appreciated.