Just How Far Will Banks Go to Collect Student Loan Debt?
Remember how I said that it is almost impossible to escape a student loan debt, not even through bankruptcy? A recent news story served as a reminder that banks will go after that money by any means necessary, no matter how vulgar their behavior may be.
Consumerist shared a story about a young woman who passed away from a rare form of cancer and left her student loan debt behind. According to the rules, no one else is responsible for her debt as long as no one else cosigned the loan. No one else did. So, when she passed away, the banks couldn’t go after anyone else for the money. This woman followed the student-loan rules and did not ask her parents to co-sign, so they didn’t have to pay her debts.
But did that stop Wells Fargo from going after her parents for money they didn’t owe? Nope.*
This isn’t a message to avoid Wells Fargo or one specific bank in particular. The name of the bank doesn’t really matter. What matters is that student loans are serious business. This young woman did everything right and had her loans in her name–yet one of the banks still made trouble. Whenever you take on a student loan, know the rules, and let your family know about your financial situation so they are prepared no matter what happens.
*After a local news story and some richly deserved public shaming, Wells Fargo backed it up. When in doubt, call “Seven on Your Side” or your local equivalent. It appears to be almost as effective as calling a lawyer.
Image of $620 in 31 twenty-dollar bills by Merzperson from Wikimedia Commons, public domain.
Post Academic 
on February 12, 2011 on 6:37 am
They can also garnish your wages without having to take you to court, on federal student loans. In general, collections processes are preposterous; and most engage in illegal, threatening behavior because they simply can. The collections process really needs to be toned down a lot and brought back in line with government regulations.
on February 12, 2011 on 12:30 pm
There’s another one! I totally forgot about garnishment! I agree that the debt collections process is out of control. I understand that companies want to collect on their loans, but going after a dead person’s parents and threatening to break kneecaps is crossing a line. You can report them to the FTC (http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre18.shtm), but I’m not sure how much teeth they have in the situation since debt-collection nightmare stories are fairly common.