Dave Ramsey: Don’t Pay Those Student Loans

Dear Dave,

My brother was killed earlier this year, and my mom is finalizing his estate. He had a couple of federally insured student through Sallie Mae totaling $8,000 at the time of his death, and the attorney probating the estate says mom now has to pay off those loans. Is that correct?

I’m so sorry to hear about your brother. But no, your lawyer is not correct. Payment for federally insured student is not due upon the borrower’s death. They are waived.

The Dave Ramsey Show

The Dave Ramsey Show (Photo credit: .imelda)

And that’s about the only way a student, or any co-signer on a student loan, can get out of paying it off: to die! And even then it’s hard:

You can take care of this by sending a copy of the death certificate to Sallie Mae.

I’ll warn you ahead of time that it may take a while to jump through all their hoops. I mean, you’re dealing with the federal government. They’re not exactly known for getting things right the first time. But once you’re declared permanently disabled or you pass away, federally insured student are discharged and not held against the estate.

You’ve read elsewhere that parents or grandparents who co-sign a student loan are having their Social Security checks dinged if the aren’t paid. Talk about redistributing the wealth!

It’s not about wealth, however, it’s about ignorance. When I went to Cornell my dad paid for most of my expenses. Student didn’t exist back then (in the dark ages) and if they had, my dad would have shunned them anyway.

I have views that my dad’s money was largely wasted on me, but that’s another topic for another day. What I didn’t have at the time was any insight into options other than going to college. I was “college-bound” from the moment I could articulate words.

Today options abound. Online schools like MIT are essentially giving away their courses along with certificates indicating competency. A student today can get an excellent college —if he is determined to do so—for less than $15,000. That’s $15,000 for the full four-year course.

But why college? Aren’t there other options? Of course there are.

But the main point is: don’t borrow. Don’t, for Heaven’s sake, borrow from the federal government. They will put you back on the plantation where you will “owe the company store” forever.

Unless you die.

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