Delphos family harassed by loan collectors after student death

Last updated: June 04. 2014 8:45PM - 1699 Views
By - ckelly@civitasmedia.com

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DELPHOS — A Delphos woman joined Sen. Sherrod Brown, D-Ohio, on a news conference call Wednesday to share her family’s traumatic experience with a student loan lender after the March 31, 2013, death of her brother.

“My brother Andrew was 24 years old and a law student at Duke, and he was killed in a car accident about three weeks before his graduation,” Olivia Katbi said. “He had student loans from both undergrad and law school through several different providers, and my mom cosigned all of them. After his death, my parents sent a copy of his death certificate to all of the loan servicers, asking for that debt to be forgiven.”

Andrew Katbi, a 2006 Delphos St. John’s graduate, had finished a finance degree at Ohio Northern University before attending Duke to finish his law degree. After notifying his student loan providers of his death, his parents did experience some reprieve from two of them, with Citi and Discover forgiving the debt, despite not having any requirement to do so.

“Sally Mae was a complete nightmare for my parents to deal with,” Katbi said. “First, they wouldn’t return their phone calls or they would keep them on hold for hours, making it impossible for them to even talk to a human. Meanwhile, they kept sending letters to the house asking for payment. They would leave messages every night saying, ‘This message is for Andrew Katbi.’ They didn’t even confirm that we had notified them that he died.”

Nine months after her brother’s death, Katbi finally spoke with someone in upper managment and was summarily dismissed, being informed that the loan needed to be paid regardless. Katbi said officials from Sally Mae were even rude with the family, at times.

“So that made me really mad, and I got on Twitter and started tagging Sally Mae in tweets and people started noticing,” Katbi said. “Finally, after it gained traction on social media, Sally Mae contacted us to resolve the issue, but it was only after people started publicly shaming them that they tried to save face, while they were completely negligent about that before.”

In an effort to curb these practices, Brown announced his plans to introduce legislation requiring more transparency in student loan servicing, requiring private lenders to clearly outline its repayment policies in the event of the death or disability of the borrower.

“Student loan documents are written in legalese that only lawyers, frankly, are trained to understand,” he said. “With more than 40 million borrowers facing over $1 trillion in student loan debt with over 850,000 private student loan borrowers in default, we know reforms are needed before another generation becomes burdened with this onerous debt.”

Deanne Loonin, an attorney with the National Consumer Law Center, pointed out that there is little protection for borrowers in the current student loan system.

“In the private loan market, there is very little relief for borrowers, and certainly no mandatory relief,” she said. “Even with the two creditors that did forgive Katbi’s debt, that was at their discretion. That’s done on a case-by-case basis.”

In fact, Loonin maintained that some lenders actually take advantage of situations like this.

“The Consumer Financial Protection Bureau recently did a report and pointed out that in some cases, when a cosigner passes away or even files for bankruptcy or becomes disabled, some of the lenders are automatically accelerating the loans and putting them into default, even if there is a borrower who is willing to pay,” she said.

Brown argued that student loans, like other loans, should give borrowers the opportunity to refinance.

“Many have mortgages that are 3 or 3 and 1/2 percent, but their student loans could be double or triple that, but they can’t refinance,” he said. “The current system is not designed the way it should be. It’s designed to fail.”

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