Smart Borrower Blog

Wells Fargo Changes Student Loan Forgiveness Policy


Dec 20th, 2010 @ 5:46 PM by Debbie Dragon


Wells Fargo announced this week that effective this Friday, student loans will be forgiven at the time of the student-borrower’s death or if they are declared permanently disabled. Up until now if a student became permanently disabled or passed away, their student loan debt became the responsibility of the loan’s co-signer, which is most often a family member.

When asked if this new policy was in light of legislation currently in the Senate that would require banks to explicitly detail the responsibilities of the co-signer if the borrower died or was permanently disabled, Wells Fargo was quick to say no. Bonnie Wallace, Vice President of Enterprise Partnerships at Wells Fargo said, “We constantly are looking at our policies and looking at how our policies match up to customer needs.” She went on to say that the company had actually been looking at the issues since January of this year.

Meanwhile, a bill tackling just this issue is currently waiting for Senate approval. A version of the Christopher Bryski Student Loan Protector Act passed in the House of Representatives earlier this year was introduced as a way to honor a student from the University of Rutgers who passed away back in 2006. His family today is still paying off his private student loan debt of $44,500. This bill would not require lenders to forgive loans, but to explicitly counsel the borrower and co-signer(s) on what effect death or disability would have on the borrower’s federal and/or private student loans.

Sallie Mae also forgives student loans when the holder dies or becomes disabled. There are other student loan lenders however, who do not forgive the debt. Once such lender is Student Loan Corp. According to their spokesperson Mark Rogers, “A cosigner accepts responsibility for a loan if the other party is unable to pay, and they are expected to honor the contract as they would other obligations.”

Wells Fargo will be posting their new policy on their website and informing colleges of the changes, but loan holders will not be receiving any documentation on the new policy. New loans however will have the new loan forgiveness policy spelled out for borrowers.

About Debbie Dragon
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.

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