Sallie Mae Forgives Dead Student's Debt After Media Attention

Even death is not enough to shake off student loan debt. One New Jersey family learned this in the most awful way imaginable.

When Amanda Greenhalgh died at the age of 24 in 2010, her father and grandmother were on the hook for more than $100,000 in loans used to pay for her degree at Penn State University, The Star-Ledger reports (H/T The Consumerist).

Greenhalgh, who was was earning $74,000 a year, hadn't missed a payment. Her loans were with Sallie Mae, reportedly one of the few lenders that has a death and disability policy -- which allows family members to discharge student loans if they can provide a death certificate for the student.

The family contacted Sallie Mae several times, but they were re-directed to call centers in the Philippines with no one available to oblige the request, the family told The Star-Ledger. Sallie Mae did not forgive the loan amount until after the family contacted Bamboozled, a consumer affairs column for The Star-Ledger, the paper reported this week.

Most lenders do not have a clear policy about what happens to a co-signed student loan when the borrower dies or becomes disabled. After Rutgers University student Christopher Bryski passed away in 2006, leaving behind a $50,000 student loan balance, his family, who had originally co-signed his loan, paid off 40 percent of his debt and engaged in a lengthy battle with loan provider KeyBank before getting the remaining balance cleared.

As a result of the Bryski family's struggles, Congressional legislators introduced a bill known as the Christopher Bryski Student Loan Protection Act. The bill would have required lenders to make it clear to students what will happen to their loans at the time of their death. It passed the House in 2010, but didn't make it through the Senate.

With the country's student debt load now 25 percent higher than it was in 2008, many young Americans are facing the mounting pressure of their loan payments in the still weak job market. Based on reported data from nearly 100 schools, the Institute for College Access & Success' Project on Student Debt has estimated that 90 percent of students from the class of 2010 carried an average amount exceeding $35,000 in student debt, according to USA Today.

The student loan issue -- which many analysts regard as an unsustainable bubble that could eventually wreak havoc on the national economy -- is expected to play a major role in the upcoming presidential election.

CLARIFICATION: Sallie Mae's death and disability policy only applies to students loans with a main borrower and no cosigner.