<p>"... your parent dies or declares bankruptcy. If this loved one was a co-signer on your student loan, this change can trigger an often-overlooked clause that allows the lender to claim you are in default on your loan, potentially wreaking longterm havoc on your credit and finances." ...</p>
<p>I guess you have to make sure they leave you enough in their will to cover it.</p>
<p>Can you get life insurance coverage for the co-signer? Of course, this won’t help if they declare bankruptcy.</p>
<p>I think that doing this will backfire. a bank that has been receiving regular payments is now going to receive little or nothing, because the surviving person cant pay the lump sum.</p>
<p>I would think that if the cosigner died, the lender could get the balance as a creditor on the estate…assuming that the estate was big enough? I could see that causing significant family strife!</p>
<p>Really, auto-defaulting someone who is making their payments is crazy, IMHO, as well as unethical: yes, unethical, even if the contract says you can. Anyone who has this done to them should take to social media in a big way and let the world know that the bank did it to them.</p>
<p>Back during the mortgage default frenzy there was word that banks were calling the loans of people with HELOCs who had never missed a payment f they found out that the borrower’s income was “too low.” Another cut of your nose to spite your face move, but devastating for the individual.</p>