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Dad overwhelmed by dead student's loans

A father co-signed for the private student loans, but now he can't find out who owns the loans and exactly how much they are.

By Karen Datko Jun 15, 2012 1:54PM

Image: College graduate (© Corbis)We shared the story about a father who co-signed his son's private student loan and was still obligated to pay after the son had died. The bank forgave the loan six years later -- only after the family launched a public petition drive.


A new and similar story, from ProPublica, has an added complication. A grieving father who co-signed for his now deceased son's considerable private student loans can't even find out who owns those loans -- just in case they'd agree to let him off the hook (and, no, taxpayers won't be stuck with it if they do).


Francisco Reynoso, who earned $21,000 last year as a gardener, is legally responsible for paying off student loans in excess of $167,000 because he co-signed. If lenders don't forgive the debt, his only hope is a hard-to-get hardship discharge in bankruptcy court. Student loans generally are not dischargeable in bankruptcy.


ProPublica explains:

Just as happened with home mortgages in the boom years before the 2008 financial crash, his son's student loans have been sold and resold, and at least one was likely bundled into a complex Wall Street security. But the trail of those transactions ends at a wall of corporate silence from companies that include two household names: banking giant UBS and Xerox, which owns the loan servicer handling the bulk of his loans. Left without answers is a bereaved father.

The son -- Freddy Reynoso, an alum of the Berklee School of Music -- was the first college grad in his family. He was killed in a car crash in 2008 while on his way home from a job interview, ProPublica says. (Post continues below.)


His federal student loan debt was forgiven as a matter of course. But not so the private student loans. Debt collectors went after the father even though he had hired an attorney to help sort through this mess. "By law, debt collectors must go through a debtor's attorney if one has been hired," ProPublica says.

"Despite the help of a lawyer, Reynoso has not been able to determine exactly how much he owes, or even what company holds his loans," the article says.


Here's what ProPublica could find out:

  • One private loan was originated by Bank of America and sold to First Marblehead, which bundles loans and sells them as securities. It hasn't said what became of Freddy's loan.
  • The rest of the private money was loaned by Education Finance Partners. That loan was acquired by UBS in 2008, then sold in 2009. UBS says it is prohibited from identifying the buyer. ACS Education Services, a subsidiary of Xerox that is servicing the loan, most likely knows who owns it but so far hasn't said.

One commenter at ProPublica raised issues that many of you are probably wondering about.

Here's a question: Why did the bank allow a gardener whose entire annual income would barely cover the semester's tuition ($17,725 for Fall 2012 before fees, according to their website) … co-sign for the loan?
I might also ask how the financial aid office allowed (the son) to take on that kind of loan, knowing it'd be impossible to pay back.

Some readers lamented that Freddy did not have life insurance. Another reader said:

NEVER, EVER co-sign a student loan for your kids … NEVER.
As tragic as this is, these student loan providers trick parents into co-signing without parents understanding that if the student defaults for whatever reason they are on the hook.
Many parents have had their lives derailed by these realities.

More on MSN Money:

Jun 15, 2012 6:41PM
there is no way that loan should ever have been made in the first place. the loan officer, who was probably paid on commission, certainly did not take the four c's of creditworthiness into consideration. these are character, credit history, capacity, and collateral. God help us all to survive th economic mess this nation has ben lead into. 
Jun 16, 2012 1:04AM
Today, 52% of all (2011-2012) college graduates with bachelors degrees are either unemployed or under-employed and many with astronomical student loan debt.  In this day and age, seriously, why bother getting a college degree?  The ROI just isn't worth it.  

You're much better off learning a valuable trade and making a living at it than some ridiculous non-paying degree.   College degrees are basically worthless and have been devalued to nothing more than what GEDs were valued at 20 years ago.  Save the money - buy a house, start your own business or make solid investments in upstart companies with the money instead.  You'll wind up with more money and less heartache in the end.
Jun 15, 2012 7:35PM
why on earth would anyone pay $167K for a stupid music degree?? Buy a house and rent out the rooms to the dumb students who are paying that much.
Jun 16, 2012 11:51AM
So sad for the family that they lost their son.  I will tell you this,..Bank of America is the WORSE!!! They won't work with you.  They are awful.  I can tell you though, with the man co-signing, he will be legally responsible.  My father co-signed for a great-grandson and they hounded him constantly when the great grandson wouldn't pay.  It wasn't until after my dad passed three years ago, they finally went after my great nephew, because they had no other recourse.  They HAD to go after the original signer of the loan.  It took me a year and constant mailing of death certificate and other documents to finally get my father's name removed from the loan, because they starting hounding my mother who WAS NOT a co-signor.  I finally threatened to get a lawyer as they harrassed my 80 year old mother continually.  That finally put an end to it.  These student loans are awful.  These kids don't realize these loan companies are sucking you in and at the time, these kids don't realize "hey, I need to pay this back..."  Good luck to all who have one....
Jun 18, 2012 12:33PM
It is sad that the family lost a son grieving family; howevwer, the lose of a son and the loan are 2 different issues. The issue of co-signing on a loan is the acceptance of personal responsibility. The American public needs to understand that the co-signer of a loan is legally responsible for the loan. One area that I see a lot is co-signers credit score taking a hit because of late payments made on a loan where he/she co-signed. The best policy is "NEVER CO-SIGN ON A LOAN".   
Jun 19, 2012 12:03PM

Only a fool would co-sign on loans for $160k+ when he only makes about $20k/yr.  And only a fool for a banker would do the same.  I don't have any sympathy for either side. 


About the only thing student loans have accomplished is to drive up the demand (and price) of education.  In the end, if there was no such thing as student loans, higher education would obviously be alot less expensive.  Every time loans become easier to get or the feds throw tax deductions or credits at education, the price of education goes up by about the same amount. 

Jun 16, 2012 7:52AM
We need to blame the colleges who create this nightmare for their own profit and retirement programs for teachers who basically teach skills for the unemployed.
Jun 16, 2012 8:53AM
I.m so sorry to hear about the student's death, and the way it happened must have been extremely painful to his family and friends.  If I had it my way, all students loans would  be "null and voided" if the student passes away.  I can understand that the parents wanted to help their son launch his career, but I am sure that they never saw the unfortunate coming.  Anybody can die at any time, but life must go on.  I hope the father get the peace he needs from this whole situation...
Jun 19, 2012 1:20PM

The banker that wrote the student loan was no fool. As long as the loan could be sold at a profit, the bankster did OK. Banks are in the business to make money, at anyones expense, even this 20K a year gardener.

This is no different when the banks were selling mortgages, with no money down, no verifiable income, and reselling the mortgages, at a fat profit. Now that the mortgage business has slowed down, student loans are the latest banks, huge profit machine.

Jun 19, 2012 11:38AM
While a sad story, when you borrow money, you have to pay it back. Period. Why does the company have less of a right to get their money back? I just can't get how some people think it is ok to just take whatever from a company and it is no big deal. There are employees and stockholders (including pensions and 401k plans) that depend on companies making money. It doesn't make them evil. I work to make money. My employer is in business to make money. It is how we, employees and employers, pay the bills.

Jun 18, 2012 8:14PM
First: If his lawyer was worth his weight in shite, he would file suit against the collectors for unfair debt collection practices. He has a lawyer, they go straight to him, that IS harassment, which is illegal.
Second: They wouldn't get another nickle until they verified the debt. Who holds the note? Do they LEGALLY hold the note? What is the principal and interest rate? If they couldn't prove they legally hold the note, and they have a legal right to collect debt in HIS state, (which all debt collectors can't legally do just anywhere, i.e. here in PA they have to be registered with the state to legally collect here, if not, its on them), they also wouldn't get another nickle from me.
How much will a flight to Latin America cost the grieving dad?  I think that is the best solution here.
Jul 22, 2012 12:52PM
Clearly the profession we should be going into is law. It looks like there is a huge untapped market for "hardship bankruptcy." I bet this will be a goldmine in the upcoming years.
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