Many young adults opt to attend college within the first few years following their graduation from high school. At such a young age, rarely do any of these individuals have a strong enough credit score to be approved for private student loans independently. In this scenario, students who need to rely on private student loan debt as opposed to public student loan debt alone generally need to seek out the assistance of a co-signer.
When another adult co-signs a privately funded student loan, he or she may be held responsible for paying back that loan should the student find that he or she cannot (or will not) pay it off independently. However, many students are unfortunately discovering that if a co-signer of a privately funded student loan passes away before the loan has been paid in full that they may be held responsible for the balance of the loan immediately after the co-signer’s passing.
Although this practice has drawn criticism from lawmakers and consumer advocates in recent months, it is not technically an illegal practice. If a student cannot pay the balance in full after his or her co-signer’s death, the loan company may choose to treat the student as if he or she is in default. This action can significantly affect the student’s credit score in a negative way.
If you are struggling with overwhelming student loan debt in the wake of a co-signer’s death, please do not hesitate to reach out to an experienced bankruptcy attorney. You may be able to avail yourself of certain debt relief options in order to avoid default.
Source: New York Times, “ Troubling Student Loans,” April 28, 2014