As many Americans now know, the total amount of student loan debt owed in this country reached roughly $1.2 trillion in 2013. In practical terms, this means that a vast number of people are struggling to cover their monthly student loan payments that will likely continue for one or more decades. What’s of even greater concern is that many students have private loans with unclear provisions that can cause their loans to suddenly enter “auto-default” status.
An “auto-default” can occur when a co-signor of a student loan (usually a “private” one) passes away. (It’s fairly common for some students to ask a parent or grandparent to co-sign a private student loan.) When this occurs, depending upon the loan’s specific provisions, the entire loan can be declared fully due and owing. While the majority of graduates are able to carry their monthly student loan payments on their own, the terms of your loan will dictate your fate when a co-signor suddenly passes away.
What Should You Do If Your Private Student Loan Cosigner Dies?
- Check to see if your loan has an “auto-default” provision stating what happens when a co-signer passes away;
- Contact your Peachtree City consumer protection attorney for advice;
- If your loan does include such a provision, check to see if you’ve already made the minimum number of payments required to prevent having an “auto default” declared;
- Visit www.cfpb.gov and download a sample letter you can mail to your student loan servicer, requesting that your co-signor be formally “released” from the loan – and ask for a written statement confirming that your loan is not going into our default. (It’s best to send this type of letter via certified mail, requesting the return of the “green postcard” which you’ll need to always keep in your records);
- If your lender will not release the co-signor and has declared your loan is in “auto-default” status, you might also consider immediately requesting in writing (once again, use certified mail) for a generous grace period during which a few more monthly payments will be accepted – in hopes that you can obtain all of the paperwork suggested by your lawyer and/or the CFPB that might allow you to pay off the debt on your own. (If you’ve received an “auto-default” letter from your lender – you must act right away).
Keep in mind that the Dodd-Frank Wall Street Reform and Consumer Protection Act established an “ombudsman for student loan” issues whose office stands ready to help you. Be persistent in trying to contact this office by both email and phone. (Make sure you first read all of this specific CFPB article and visit its included links designed to help those in your situation.)
If you believe that you’re a victim of any abusive debt collection practices, contact the Law Offices of Georgia consumer protection attorney Shane Smith so you can learn more about your rights under federal and state consumer protection statutes. Call (770) 487-8999 today to schedule your free initial consultation.