As a debtor you have consistently
been making payments each month cutting down the balance. Suddenly your
cosigner dies or files for bankruptcy protection. Now, your creditor is
demanding that you pay back the entire loan – despite your good faith and consistent
payments.
Automatic defaults are a big problem
for private student loans according to a report by the Federal Consumer
Financial Protection Bureau.
More than 2,300 private student loan
complaints and 1,300 debt collection complaints related to student loans
submitted to the Bureau since October 1, 2013 have been analyzed.
The Bureau’s student loan authority,
Rohit Chopra, explained that the agency cannot determine how many borrows are
impacted by automatic defaults. The problem occurs with many loan and lender
servicers.
The majority of student debt is from
federal loans which typically do not require a co-signer.
Private loans have different rules
than federal however. Private loans are typically more common for high-debt
borrowers and they usually require a co-signer. More than 90% of private loans
are cosigned and typically by a grandparent or parent.
Automatic defaults can be extremely
damaging for borrowers because potential employers and landlords can check
credit reports. Defaults can destroy an otherwise good credit score.
Here are some questions about
private student loans and co-signers:
How quickly can an automatic default
appear on my credit report after my co-signer dies or files for bankruptcy?
Most lenders check their credit
bureaus typically every month. The effects can be seen on your credit report
within a short amount of time.
Can I ask to have my co-signer released from my loan?
Typically lenders will promote
options of having a co-signer released if the debtor has met a certain amount
of consecutive on-time payments for a certain amount of time (two-years
usually) and has decent credit. Lenders however have been known to change the
policy even after meeting the criteria to release the co-signer. It is best to
check for certain.
How do I know if I'm eligible to have my co-signer released?
Always
be sure to ask your creditor about its policy and request the moment you have
met the criteria. It is good to do this in case anything happens to your
co-signer. Also, co-signers can request a release for themselves.
Marcadis Singer, PA
Florida Collection Attorney
5104 South Westshore Blvd.
Tampa, Florida 33611
info @ marcadislaw.com
(888) 547-1881
(813) 288-1881
New Clients
Ext. 247 Gil Singer
Ext. 240 Ralph Marcadis
Existing Client Client Liaison
Ext. 242
To Pay a Claim
Ext. 245
