Tuesday, April 22, 2014

Sharing an article about student loans April 22 2014

“Default by Death”

“WASHINGTON -- Some student loan borrowers have reported to federal consumer protection officials that their private lenders automatically placed them in default when their cosigner died or filed for bankruptcy, even when the borrowers were otherwise paying the loan on time.”

“The Consumer Financial Protection Bureau highlighted that issue on Wednesday in a report analyzing the more than 2,300 complaints it had received about private student loan companies from the beginning of last October through the end of March. (The volume of complaints was up by more than one-third compared to the same period last year).”  

“The issue is that some private student loans contain terms allowing lenders to demand the full outstanding amount of a loan when a borrower’s cosigner -- often a parent or grandparent -- dies or files for bankruptcy protection, according to Rohit Chopra, the CFPB’s student loan ombudsman who authored the report.”

“In some cases, Chopra said in a call with reporters, lenders have automatically placed a borrower in default upon the death or bankruptcy of the cosigner, without giving the borrower the opportunity to pay the full outstanding amount.”

“The report says that the CFPB “routinely” receives complaints about cosigner problems on private student loans, but Chopra conceded that officials do not know the prevalence of the problems.”

Have a great Tuesday

Dr Flavius A B Akerele III
The ETeam

1 comment:

  1. This practice of "auto-defaulting" is very sad and lacks empathy in an extreme way. You have to think about the possible incentives these servicers have for such an inhuman procedure. Perhaps they are making money on the securities market? Or, maybe they are paid through insurance of some kind once a loan defaults?

    It will be really sad if as a result of an investigation it is determined that these servicers are betting against the very people they are lending to.

    The only real remedy that exists now is for student borrowers to very carefully review the terms of the contracts they sign. Making sure the lender they borrow from offers a co-signer release within a reasonable amount of time. Never hurts to try and negotiate either.

    - Dennis -


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