Grads face default over cosigners

gradsfacesdefaults

BIRMINGHAM, Ala. (WIAT) — It sounds like a nightmare.

Your mom or dad have cosigned your student loan, and then something terrible happens to them.

Then you get a letter in the mail saying the full amount of the loan is due immediately. If you can’t pay it, you go into default.

Your credit score is ruined and you’re getting debt collection calls. That’s exactly what’s happening to some people, according to the Consumer Financial Protection Bureau.

It’s a big issue for students because most private student loans are cosigned.

When something happens to that person, the bank thinks the loan can’t be paid back. Usually, the contract’s fine print says an auto-default is a possibility.

To avoid it,  the student should ask the bank to take the co-signer off the loan if something happens to them.

Copyright 2014 WIAT-CBS42

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