Student loan borrowers are suddenly being thrown into default when the co-signer on their loan — often a parent or grandparent — dies or files for bankruptcy.
Even if they are current on their payments, some borrowers are immediately being placed in default and told to repay the loan in full because their co-signer can no longer back them financially, according to a report from the Consumer Financial Protection Bureau.
These so-called “auto-defaults” came to light during an analysis of nearly 3,600 student loan and student loan-related debt collection complaints submitted to the CFPB’s consumer complaint database between October 1, 2013 and March 31, 2014.
via Borrowers hit with surprise defaults when co-signers die – Apr. 22, 2014.