Earlier this month I posted a link to this Wall Street Journal article on a bill that would require lenders to make clear the obligations of student-loan co-signers in the event of a student’s death.
I got this announcement today from Wells Fargo:
New loan forgiveness policy adopted to ease burden on families and cosigners
in event of death or disability
SAN FRANCISCO — December 17, 2010
As part of ongoing enhancements in the area of education financing, Wells Fargo announced today a more formalized program around forgiveness of student loans in the event of a student beneficiary’s death or permanent disability.
“Borrowers of student loans are a very unique subset of customers for us. They are typically first-time credit customers that we are lending to, based on a future ability to repay resulting from the education they are funding,” says Kirk Bare, head of Wells Fargo Education Financial Services. “When a death or permanent disability occurs, their future ability to repay is compromised. We believe it is important to be responsive to events that affect these unique customers, and their ability to obtain financial independence and repay their loan.”
Loan forgiveness will be an enhancement added to existing and future Wells Fargo private student loans used to directly cover education-related expenses.
The forgiveness covers the death or permanent disability of the student beneficiary of the loan. In the past, WF consumer credit agreements clearly stated the customer’s and co-signer’s obligation to repay the loan, even in the event of a student’s death or disability. In the future, new WF consumer credit agreement language will explain the new benefit.
“A student loan is acquired as an investment in education that is intended to prepare a student for a career and financial independence. Our student lending underwriting process is based on a future ability to repay, rather than a borrowers present ability to repay. When that future ability to establish financial independence, acquire assets, and build an estate is compromised by a death or permanent disability, loan repayment becomes especially burdensome,” added Bare. “Formalizing this into our standard policies and procedures ensures that customers and their families who are impacted by these types of unfortunate situations are provided needed relief.”
Wells Fargo’s new policy requires verbal or written notification of the student beneficiary’s death or permanent and total disability followed by receipt of acceptable documentation. Once Wells Fargo is notified, a representative from Wells Fargo will work with the family to complete the required steps necessary to legally forgive the loan obligations. Once acceptable documentation is received, future or pending loan disbursements and pending or in process loan applications are canceled.