Niagara Gazette — U.S. Sen. Charles Schumer is backing a new law that would require private loan companies to forgive student loan debt immediately after the death of the student.
Called “Andrew’s Law,” the legislation is named in honor of Andrew Prior of Syracuse, who was killed by a drunk driver shortly after graduating from college in 2010. Prior had one federal loan and three outstanding private student loans at the time of his death, which were co-signed by his parents. The federal loan and two of the private loans were forgiven shortly after Andrew’s passing, yet it took over two years for the loan servicer to forgive the remaining student loan debt.
“Andrew’s Law will honor Andrew Prior’s legacy and ensure that student loan debt is one burden that grieving parents like the Priors don’t have to bear,” Schumer said. “No parent should ever be put through the ringer by callous servicers and lenders and there is no question that we need to put this common sense and compassionate policy into law.”
While federal student loans are required by law to be discharged in the event that the borrower dies, the same requirement does not apply to private student loans. The new legislation would require that private student loans be forgiven if the borrower dies, ensuring that parents who had co-signed the loan are no longer held liable for the debt.
Last week, Schumer was joined by Andrew’s parents, David and Rose Prior, as he successfully fought to assist them in their efforts to resolve the potentially crippling financial burden of repaying their deceased son Andrew Prior’s student loan. Schumer, who had been working on this case since January, highlighted that in the case of federal student loans and federal PLUS loans (loans made directly to parents on behalf of students), protections exist under current law that protect borrowers’ families by requiring loans be forgiven or discharged in the event that the borrower dies.
In Andrew Prior’s case, in addition to a federal loan, he had three outstanding private student loans at the time of his death. The companies that owned two of these loans, Discover Student Loans and Education Empowerment Fund, worked expeditiously with the Prior family to discharge the loans and ensure that this family’s credit was not negatively affected.
However, up until mid-February, over two years after Andrew’s death, the third private loan had not been forgiven. Schumer said the loan servicer is reported to have hounded the Prior Family for payment and even threatened to take away their home and car.
Many private loan providers, such as Sallie Mae and Wells Fargo, have established programs to forgive debt in the event of the student borrower’s death, just as federal loans do.
But the practice must become universal, Schumer said.
Private student loans make up less than 15 percent of total student debt outstanding as of Jan. 1, 2012 and contributed less than 7 percent to the estimated $112 billion in total student loans originated in 2010-11.