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If I Kill Myself Will Sallie Mae Take My Life Insurance Money to Pay the Student Loans? – Sam

Written by Steve Rhode

“Dear Steve,

Took out student loans at 8.5 % interest rate in middle 90’s to enable me to get Bachelors degree to be a teacher, have been making payments off and on since depending upon if I could afford them or not. Have used up all forbearances, etc…options, and am currently in about month 6 of a year long income sensitive repayment plan.

I owe about 35,000 and currently the 120 monthly payment, NOTHING, is going to the principle. I have no chance to pay this off as long as I am forced to play this game. I cannot ever foresee being able to make monthly payments of 300 to 500 to pay it off; They refuse to negotiate any lower interest rates, they refuse to apply payment amounts that I can afford to the principle, and sadly have the law on their side to hound me to my death.

I have 250,000 life insurance policy that has been in place for 15 years now. I believe my student loans are only in my name, but I’m not totally sure of that – If I kill myself, will sallie mae try to take that money to repay the debt?

Sam”

Desperate

Dear Sam,

It is my understanding that Sallie Mae could only look to your estate for repayment if you are the only one responsible for the loans. That’s a big deal and certainly worth carefully checking. I would not make any assumptions you were.

I believe that the life insurance proceeds would go to the designated beneficiary outside the control of any creditor.

Before you consider anything drastic you might want to read The Ultimate Guide to Dealing With Student Loans You Can’t Afford.

I would never be an advocate for suicide over student loans. I’ve heard the same refrain from others as well.

If you find yourself in an unmanageable place when it comes to the student loans you can buy five years or so by considering a chapter 13 bankruptcy. More people are looking to rolling chapter 13 bankruptcies to pay what they can afford now in hopes of Congress or the Consumer Financial Protection Bureau passing new rules regarding allowances for private student loans.

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But just because your loans are with Sallie Mae, does not mean they are automatically private loans. If they are subsidized loans they would be eligible for the programs I talk about in my student loan guide.

You can click here to find a local bankruptcy attorney and talk to them for free about your specific situation. Get the facts and then you can make an informed and educated decision if bankruptcy is right for you.

Please post your responses and follow-up messages to me on this in the comments section below.

Sincerly,
Steve

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.




About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

8 Comments

  • I am choosing to remain anonymous by posting this, but I do want to say that I’m 35 1/2 years, legally autistic, work 6 days a week, 11 hour days, as a pharmacy technician and still can barely even pay my month expenses. I have over $10,000.00 in credit card debt, with all but one of my credit cards currently in collections. I am not, nor have I ever been married, nor have I ever had anyone co-sign on any of my financial arrangements, nor do I have any children or dependents. I do not have any student loan debt, because I made the moral, religious and conscientious decision at age 18 that I simply could not in good conscious ever register for Selective Service, I am a 100% absolute moral, spiritual and religious pacifist, and could never, and will never take up any violent action against another human being, even in self-defense. I worked full-time throughout my entire college career to pay my way through school, but often found myself using credit cards as the only way to keep a roof over my head and food on my table. If I ever get to the place where I am realistically looking at homelessness (which could very well happen), I would much rather commit suicide and end my own life at my own hands than ever declare bankruptcy. My understanding is that legally, since I own much, much less property than my credit card debts (my most valuable possessions are 5+ year old TV’s, and stereo systems), if I were ever to commit suicide, no one could ever legally inherit my debts, and the credit card companies would have to eat them. Personally, I’d much rather deal with credit card shitheads that way than the unimaginable pain, stress and duress of bankruptcy..

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