A majority of college students who take out private loans are unaware of specific disclosures that can affect the terms of payments, even after death.
Last year at the undergraduate level, 2.8 percent of students at The University of Mississippi borrowed private loans, and 2 percent of graduate students borrowed private loans.
Most private loans have a benefits and services provision that details loan forgiveness if a borrower dies, is permanently injured or has to file for bankruptcy.
Ole Miss has partnered with five lenders that offer permanent disability and death benefits to borrowers: Citizens Bank, Wells Fargo, Sallie Mae, Discover and SunTrust.
Director of financial aid Laura Diven-Brown said that while federal loans have death and disability benefits, the loans themselves may not cover the total cost of attendance, which leads students to take out private loans.
“We are looking to ensure that the kinds of products that we share information about with our students are things that we would find legitimate,” Diven-Brown said.
For insurance, if the primary borrower dies, selective loan organizations offer cosigner release so the debt won’t carry over to the cosigner.
“Borrowers can apply for cosigner release, but that doesn’t mean they will automatically get approved,” said Seph Anderson, coordinator of student loan operations at Ole Miss.
Anderson also said the cosigner release is used for parents to remove their name from the loan for their credit report so they are not held responsible for repayment.
Junior art major Elizabeth Tutor said that while she understands the expectation that a borrower is to pay back borrowed funds, she said she acknowledges the burden on the parent.
“It would be idealistic and nice to have the loan completely wiped away if the borrower passed away, but I think it would be more reasonable to ask for a grace period to deal with the passing of their child,” Tutor said.
“But lenders do have to get the money that they loaned out back.”
Senior marketing major Jamie Battle agreed that the loan should not transfer to the parents.
“I don’t think it’s fair because it shouldn’t be the parent’s responsibility to take care of their child’s loan burden if he or she dies,” Battle said.
Although Battle said she knows about particular disclosures of private loans and the debt that private loans will accrue, she said she has no other options.
“I have no other choice,” she said. “I don’t have a lot of scholarships that will pay for college.”