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Grieving Father Struggles to Pay Dead Son’s Student Loans

Grieving Father Struggles to Pay Dead Son’s Student Loans
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Written by Marian Wang

A few months after he buried his son, Francisco Reynoso began getting notices in the mail. Then the debt collectors came calling.

“They would say, ‘We don’t care what happened with your son, you have to pay us,’” recalled Reynoso, a gardener from Palmdale, Calif.

Reynoso’s son, Freddy, had been the pride of his family and the first to go to college. In 2005, after Freddy was accepted to Boston’s Berklee College of Music, his father co-signed on his hefty private student loans, making him fully liable should Freddy be unwilling or unable to repay them. It was no small decision for a man who made just over $21,000 in 2011, according to his tax returns.

“As a father, you’ll do anything for your child,” Reynoso, an American citizen originally from Mexico, said through a translator.

Now, he’s suffering a Kafkaesque ordeal in which he’s hounded to repay loans that funded an education his son will never get to use — loans that he has little hope of ever paying off. While Reynoso’s wife, Sylvia, is studying to be a beautician, his gardening is currently the sole source of income for the family, which includes his 18-year-old daughter Evelyn.

And the loans are maddeningly opaque. 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. 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 risk of cosigning on Freddy’s loans seemed to have been worth it when he graduated in May 2008 and began looking for a job in the music industry. He was on the way back from a job interview on the evening of Sept. 4 when he lost control of his car and it rolled over. Freddy’s family learned of his death the next morning.

The grief was relentless; the debt collectors, ruthless. By law, debt collectors must go through a debtor’s attorney if one has been hired, but even after Reynoso hired an attorney, he said they continued to call him every day, several times a day, for about a year and a half: “I would tell them to call the lawyer. And they would still say, ‘The lawyer doesn’t owe us. You’re the one who owes us. You’re the one who has to pay us.’”

Meanwhile, Reynoso was still reeling: “I was crying for him every day,” he said.

The question of to whom Reynoso’s debts are actually owed — and who has the authority to forgive them — is a mystery that thus far neither Reynoso nor his lawyer has been able to solve.

One of Freddy’s student loans was cancelled after his death without a problem: his federal loan. That’s because the government cancels student loans if a student dies.

But the bulk of Freddy’s loans were private student loans, which typically offer less favorable interest rates and fewer consumer protections. Only a few private student lenders offer debt discharges in the event of the borrower’s death, though public outcry over specific cases has swayed lenders to grant occasional death discharges.

But for the Reynosos, just figuring out whom to appeal to has been an exercise in futility. Working with a law firm, Francisco Reynoso sent copies of Freddy’s death certificate to any company that sent paperwork about the loans. He remembers being told by at least one company that they’d call him to work out a solution. But no one ever did, he said, and the bills kept coming –each time larger than the last with more interest, more late fees.

“We sent out death certificates to all of them,” said Dolores Orozco-Serrano, a legal administrator with Borowitz & Clark, the bankruptcy law firm handling the Reynosos’ case. Only the federal loan was discharged. “Everyone else was not cooperative at all.”

Freddy Reynoso’s private loans were originated by two companies — Bank of America and Education Finance Partners. Neither company still holds onto them. ProPublica tried to find out who did.

First, the Bank of America loan: Almost as soon as Bank of America originated it, the loan was sold to a Boston-based company called First Marblehead, once one of the biggest securitizers of student loans. But nowhere in the paperwork sent to the Reynosos and reviewed by ProPublica does the name First Marblehead appear. Instead, the Reynosos have received paperwork emblazoned with the logo of National Collegiate Trust. That’s the name First Marblehead gave to bundles of loans that it turned into Wall Street securities and sold to investors. Was Freddy’s loan bundled into a security? And if so, who owns it now? First Marblehead has not returned repeated requests for comment.

Freddy Reynoso’s other loans followed an even more complicated path– and one tainted by scandal.

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Photo: Francisco Reynoso, with his wife Silvia and daughter Evelyn in the background (J. Emilio Flores/ProPublica)

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83 comments

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1:59AM PST on Dec 30, 2012

Oh I see. He had a Federal loan, which was discharged. I really should read first and write later, sorry.

1:56AM PST on Dec 30, 2012

$160,000 for a music education? Now I feel better for borrowing $17,000 (Federal student loans) for graduate school in sociology between 1993 and 1996.

Why didn't the dead dude get a Federal loan?

1:54AM PST on Dec 30, 2012

Why not conventional Federal student loans which (student loans) are automatically discharged if the student dies?

2:50PM PDT on Jul 14, 2012

This poor family. How outrageous!

1:40PM PDT on Jun 28, 2012

Can't the lawyer get a court order for the information to be released? This is terrible. I hope somehow the loan will be forgiven.

8:00AM PDT on Jun 26, 2012

rediculous that they would make him pay that
shows what monsters people are becoming

8:36PM PDT on Jun 24, 2012

this is disgusting the loans and the debts should be cancelled by all parties upon his son's death - that these vultures are allowed to chase the father for the repayments without telling him how much he owes and who to just shows the depths of depravity a society can allow some of its 'institutions' to fall to - shameful

4:59AM PDT on Jun 23, 2012

Reynoso says: "I am in the hands of God". As far as I am concerned this should be corrected in "I am in the hands of CROOKS". Ah, American values, aren't they beautiful?

2:07PM PDT on Jun 21, 2012

tragic thanks for sharing

12:48PM PDT on Jun 21, 2012

HELPFUL LINKS

Direct Loans
http://www.direct.ed.gov/

National Student Loan Database
http://www.nslds.ed.gov/nslds_SA/

With these two services you should be able to locate and manage all your student loans and take control for yourselves. These people are not interested in screwing you or getting a higher amount of interest out of you or any of that. Trust them they will help you.

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