7 months, 4 weeks ago From stltoday.com
From From stltoday.com:
Some people who pay private student loans on time are being placed in default when the co-signer of their loans dies or declares bankruptcy, the Consumer Financial Protection Bureau said in a report due out today.
These "auto defaults" force borrowers to either immediately repay the full loan balance or ruin their credit, hurting their chances of getting a job, renting an apartment or buying a car.
The practice occurs in the private student loan market in which banks and other financial firms provide education financing. Private loans generally carry higher interest rates and fewer protections than federal loans, and borrowers are often required to have someone else co-sign the agreement to ensure repayment.
In its mid-year report on student loan complaints, the consumer bureau highlighted grievances that have emerged with more than 90 percent of private loans now being co-signed. Chief among the 2,300 complaints about private student loans submitted to the bureau in the past five months was the triggering of a default by the death or bankruptcy of a co-signer, even if the loan was being paid on time.