Over $100,000 in Student Loans Forgiven
William came to CVLS with an interesting yet troubling problem. About twenty years ago, he co-signed his brother Robert’s student loans with the Illinois Student Assistance Commission (ISAC) in order for Robert to attend graduate school. Robert finished school successfully and began paying the loans back. Sadly, Robert passed away in the beginning of 2021 with a significant unpaid loan balance.
After Robert died, William received a letter saying the loan was forgiven as a result of the principal borrower’s death. However, the loan servicer quickly sent a follow-up letter stating that in fact they were not forgiving the loan because it was backed by the State of Illinois. As a result, William thought he was on the hook for the over $100,000 in debt.
William consulted with a few private attorneys, most of whom recommended bankruptcy, but William hoped for a better option. That’s when he contacted CVLS’s Debt Collection and Credit Protection Clinic, and volunteer Steven J. Uhrich agreed to take his case.
Steven researched this issue and found an obscure amendment to the Truth in Lending Act that arguably requires the State of Illinois to forgive William as the co-signer. The rationale behind this law is that, since co-signers of student loans receive no direct benefit from the loan, after the principal borrower dies, they should be released.
Even after being threatened with litigation, CVLS's volunteer attorneys did not back down. ISAC eventually agreed to forgive the loan it its entirety! This forgiven amount will not be taxable, so William will be able to live out his retirement without this debt hanging over his head.