WASHINGTON (AP) — The Consumer Financial Protection Bureau says that after the death or bankruptcy of a parent or grandparent, some student loan borrowers who used these relatives as a co-signer are alarmed to learn they must immediately pay a loan in full.
Agency ombudsman Rohit Chopra (ROW-hit CHO-pra) says complaints related to this issue are growing more common because the practice is catching so many consumers by surprise. The lenders have clauses in their contract that explain this could happen, but many consumers don't realize it.
The issue affects private student loans and not federal student loans.
The Consumer Bankers Association said in a statement that its members work with their customers "carefully and compassionately" and it is common practice for the lenders to release co-signers from loan obligations.