<p>Parents and students who are thinking about co-signing for a student loan- BEWARE!
A new report by the Consumer Financial Protection Bureau shows that lenders can demand complete repayment if a co-signer dies or files for bankruptcy.</p>
<p>This is one more reason to do anything to avoid signing for these loans.</p>
<p>It would make sense for the cosigner to set up a life insurance policy to cover the cost of the loan, wouldn’t it? Now that I think if it, both co-signers should set up life insurance, payable to the other so-signer.</p>
<p>how does the lender learn that the co-signer died?</p>
<p>Well…SS records will indicate he/she has died. We get loan interest statements that say they are also mailed to the IRS, which I believe is also linked to SS.</p>
<p>that may be so, but the gov’t shouldnt be sending that info to a private bank w/o permission. If I have a discover cosigned loan, and I die, how is the discover notified? discover shouldnt have access to my ss info.</p>
<p>Estate executors have the legal obligation to report the death to all creditors. That’s why my daughter has life insurance in our name for the original amount of the loans that my husband cosigned for her.</p>
<p>The most basic SS info seems to become available to the public when someone dies. Ancestry sites take advantage of this, for example. I don’t defend the practice; I merely note it.</p>
<p>Being dead is not privileged or confidential info. The bank has a right to know if its borrowers have died because they have interests to protect. The bank may need to file a claim against the estate, or even open an estate if it thinks the assets are being disbursed without the creditors being paid.</p>
<p>The government SHOULD notice if a SSN is still being used after someone has died as it is one of the biggest forms of fraud. If the loan is in the deceased’s name, then that SSN is still being used, transactions are still being reported to the IRS and credit bureaus, and they have to stop. The creditor extended credit based on the potential income/repayment of two (or more) borrowers and now one is dead; the creditor has a right to know and it is probably a term in the loan that the survivor notify the creditor of any change in status of the co-borrower. Death is a change of status.</p>