Private lenders are revising student loan contracts to ensure people are not placed in default when the co-signer of their loan dies or declares bankruptcy, putting an end to a practice brought to light by the Consumer Financial Protection Bureau.
In a letter obtained by The Washington Post, Consumer Bankers Association President Richard Hunt informed CFPB director Richard Cordray that the 10 member banks who offer student loans, including Wells Fargo, PNC Bank, Discover and Sallie Mae, have changed their policy on so-called auto defaults. All will no longer trigger a default when a co-signer dies, while most will do the same in the event of a bankruptcy; the rest are in the process of following suit. Though the revised contract terms apply to new loans, Hunt said the banks will follow the same policy with existing loans.
Read more at The Washington Post: https://www.washingtonpost.com/news/grade-point/wp/2016/10/27/bankers-ease-rules-on-automatic-student-loan-defaults/