Student Lenders Urged to Halt Default When Co-Signers Die
By Janet Lorin Apr 22, 2014 12:01 AM ET
Some private student loan borrowers whose co-signers die are facing automatic default, even if their loans are in good standing, the U.S. Consumer Financial Protection Bureau said in a report.
The consumer bureau, which oversees private student loans, outlined the practice today in releasing a midyear report on student-loan complaints.
The federal agency received more than 2,300 private-loan and more than 1,300 debt-collection complaints between October 2013 and March 31 of this year, according to the report. Issues with co-signers, often a parent or grandparent, have routinely emerged as areas of concern, the agency said.
Many private loan contracts include options for lenders to demand the full balance when a co-signer dies or files for bankruptcy, according to the report. While the agency cant quantify how often the problem is occurring, it suggested ways to protect borrowers such as releasing co-signers.
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http://www.bloomberg.com/news/2014-04-22/student-lenders-urged-to-halt-default-when-co-signers-die.html