CFPB Finds Private Student Loan Borrowers Face “Auto-Default” When Co-Signer Dies or Goes Bankrupt > Blog > Consumer Financial Protection Bureau

 

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the CFPB issued a consumer advisory to borrowers about how to release their co-signers from their loans. Many lenders advertise that a co-signer may be released from a private student loan after a certain number of consecutive, timely payments and a credit check to determine if the borrower is eligible to repay the loan on their own. But most student loan servicers do not tell consumers when they are eligible to release their co-signer, so consumers need to ask directly for information on how to do this.

To help borrowers release their co-signers, the CFPB has put together instructions that consumers can edit and send to their student loan servicer. They can download sample letters to send by mail, or they can just cut and paste the text when they log into their account on the servicer’s website. Sample letters include those from the student who may want to release their co-signer, and those from the co-signer who may want to be released.

The advisory can be found at:
http://www.consumerfinance.gov/blog/consumer-advisory-co-signers-can-cause-surprise-defaults-on-your-private-student-loans/

The sample letter on how a borrower can release a co-signer is at:
http://files.consumerfinance.gov/f/201404_cfpb_inquiry-letter_how-to-release-cosigner.doc

The sample letter on how to be released as a co-signer is at:
http://files.consumerfinance.gov/f/201404_cfpb_inquiry-letter_how-to-be-released-as-cosigner.doc

The Dodd-Frank Wall Street Reform and Consumer Protection Act established an ombudsman for student loans within the CFPB to assist borrowers with student loan complaints. The ombudsman is submitting today’s midyear report to the Director of the CFPB, the Secretary of the Treasury, the Secretary of Education, and Congress.

The CFPB began accepting consumer complaints about private student loans in March 2012.

More information is at: consumerfinance.gov/students.

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Read entire CFPB Report Here.

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