Student Loans Can Suddenly Come Due When Co-Signers Die!

Paying for College
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<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><a href="http://www.nytimes.com/2014/02/20/business/economy/the-hefty-yoke-of-student-loan-debt.html?action=click&contentCollection=U.S.&module=RelatedCoverage&region=Marginalia&pgtype=article"&gt;http://www.nytimes.com/2014/02/20/business/economy/the-hefty-yoke-of-student-loan-debt.html?action=click&contentCollection=U.S.&module=RelatedCoverage&region=Marginalia&pgtype=article&lt;/a&gt;&lt;/p>

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<p>The article linked to does not contain any obvious reference to how death of a co-signer can affect a student loan. It is mostly a discussion about how student loan debt holds non-completers down in life, and the politics and lobbying of colleges with lots of non-completers versus government attempts to limit government money going to colleges with lots of non-completers.</p>

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<p>"The article linked to does not contain any obvious reference to how death of a co-signer can affect a student loan. "
HUH? If the cosigner dies, the lender can demand the student pay off the ENTIRE LOAN.
READ this:
“The problem, described in a report released Tuesday by the Consumer Financial Protection Bureau, arises from a little-noticed provision in private loan contracts: If the co-signer dies or files for bankruptcy, the loan holder can demand complete repayment, even if the borrower’s record is spotless. If the loan is not repaid, it is declared to be in default, doing damage to a borrower’s credit record that can take years to repair.”</p>

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<p>I later saw your other post here:
<a href=“http://talk.collegeconfidential.com/parents-forum/1642974-student-loans-can-suddenly-come-due-when-co-signers-die.html”>http://talk.collegeconfidential.com/parents-forum/1642974-student-loans-can-suddenly-come-due-when-co-signers-die.html&lt;/a&gt;&lt;/p&gt;

<p>That post has a link to a New York Times article that is about what happens when a co-signer dies. The article linked above in this thread is a different article.</p>

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<p>How would a lender even know that a cosigner died???</p>

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<p>Estate executors have the legal obligation to report the death to all creditors. That’s why my daughter has a life insurance policy in our name for the original amount of our cosigned loans.</p>