Graduates, Parents Riddled With Student Debt Turn to Bankruptcy

The larger part of the loans passed through the Swiss bank UBS and then was acquired by the Swiss central bank during the financial crisis. StabFund ultimately settled with Reynoso, said his attorney, though he can't discuss the terms of the agreement.

StabFund did not respond to a request for comment.

Clark said Reyoso is off the hook after a long effort, but unless there are changes in public policy or greater awareness about student loans, graduates--or their heirs--loaded with unaffordable debt have little recourse but to file for bankruptcy to "get creditors off your back."

"The vast majority of people we're seeing have enormous student loan debt and can't get employed," he said. "They are 40 or 50 years old who go back to school for master's degrees that earn nothing. They will never pay this off."

Ella Edwards, 61, struggled for three years to discharge her dead son's loans after he died in 2009 at age 24. Jermaine was the only son of Edwards, a single mother in Michigan who had retired. To try to repay his loans, she went back to work in a sewing job that paid $9.50 an hour.

She started a petition on Change.org to ask the loan servicer to discharge his private loan, and charitable gifts allowed her to pay off the loan. She received a $10,000 charitable donation from radio talk-show host Tom Joyner on Dec. 4 and another $1,000 gift. Edwards's financial problem may have been resolved and she is thankful to Joyner and the public, but she said she still wants to raise awareness about the problem of co-signing a private student loan.

"I know how they harass you so bad," she said. "I have not walked away from the other mothers because I am saved."

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