College Loan Forgiveness: When Student Dies, Should Parents Have to Pay?

PHOTO Jessica Roark passed away from cancer and now her parents are still stuck with her college loans.
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When John Roark's 26-year-old daughter Jessica died of cancer last August, he went about the sad task of tending to matters related to her death, including finding a burial plot and tombstone and forwarding her mail.

"I kind of took things over when my daughter passed," said Roark. "Everyone was in disarray."

He eventually had to settle matters with three lenders related to her college student loans, though he had not co-signed for them. Even after sending her death certificate to one lender, Wells Fargo, he says he received three letters a week from the bank to collect about $6,000.

The other two lenders, Sallie Mae and a Missouri student loan company, expressed their sympathy for the death of his daughter when they forgave the loans, said Roark.

"They were pretty understanding and sorry for my loss," he said.

However, he said Wells Fargo was "persistent" in trying to collect his daughter's debts from him.

The increasing cost of college tuition has led to increasing number of students who must borrow for their education. The amount of outstanding student loans in the U.S. is approximately $888 billion, according to FinAid.org.

Jessica Roark, University of Kansas graduate, who passed away in August 2010

Roark said Jessica was a "strong" person who battled a rare form of cancer, adenoid cystic carcinoma, in her eye. Before being diagnosed with cancer at age 22, she had borrowed tens of thousands of dollars in student loans to get degree in civil engineering at the University of Kansas.

Jessica had plans to pay back the loans before her death. Through radiation and chemotherapy treatments, she worked hard to remain a full-time student to stay eligible to remain on her father's health insurance plan. She graduated in May and won a full-ride scholarship for an engineering fellowship at Purdue University.

After her death in August, he starting receiving the letters, and he called Wells Fargo to explain the situation.

Wells Fargo's New Loan Forgiveness Policy

"The operator said they weren't in a position to forgive the loan and wanted to collect on it," Roark said. He then requested to speak to a supervisor, who repeated the message but said that he could write to the Wells Fargo corporate office.

He said Wells Fargo continued to send him notices requesting payment, now addressed to him and not his daughter.

"It was just a hassle trying to deal with this in the immediacy of her death," he said. "We're trying to grieve and trying to deal with her estate. There were just tons of loans."

Then, during the same week a local television news station was interviewing Roark about his dilemma, he received a call from Wells Fargo: they were forgiving the loan.

A Wells Fargo spokesperson said the company identified early last year the need for a more formal policy of loan forgiveness in the event of a student's death or permanent disability. Wells Fargo formally enacted a policy in mid-December.

"This policy took some time but the good news is we were able to apply it to this family's situation," said Erin Downs of Wells Fargo. "That's why we're proud to be one of the only private student loan lenders that give forgiveness to co-signers in the event of death or permanent disability."

One of the largest providers of private student loans, Wells Fargo has a portfolio of $26.4 billion of both federal and private education loans, according to the company. Downs said the bank serves 1.9 million student and family customers.

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