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CFPB Finds Private Student Loan Borrowers Face “Auto-Default” When Co-Signer Dies or Goes Bankrupt

Mon, Apr 28, 2014

Washington, District Of Columbia

The Consumer Financial Protection Bureau (CFPB) Student Loan Ombudsman released a report highlighting complaints of “auto-defaults” in private student lending. Borrowers report that some lenders demand immediate full repayment upon the death or bankruptcy of their loan co-signer, even when the loan is current and being paid on time. Borrowers also describe facing bureaucratic barriers to releasing co-signers from their loans, a commonly advertised benefit that could help avoid auto-defaults. To help borrowers overcome obstacles to co-signer release, today the CFPB also issued a consumer advisory and sample letters.

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Source: CFPB