May 9, 2014
Today, Congressman Rick Larsen (D-WA) introduced the Bereaved Student Borrowers Act. The bill is designed to protect grieving students and students facing family hardship from auto-defaulting on their private student loans and to get better access to information about cosigner release requirements. The bill also prohibits lenders from reporting an auto-default as a result of cosigner death or bankruptcy to credit reporting companies and stops these companies from including this information on their reports.
This issue was brought to light by the Consumer Financial Protection Bureau, which identified significant issues facing private student loan borrowers in a recent quarterly report. As of 2011, approximately 90 percent of private student loans had cosigners, and many of these loan contracts contain clauses allowing the loan to be accelerated into default upon death or bankruptcy of a cosigner, often a parent or grandparent, even when students are making loan payments on time.
The bill has eight original cosponsors, including Reps. Eleanor Holmes Norton (D-DC), Niki Tsongas (D-MA), Suzan DelBene (D-WA), Pedro Pierluisi, Denny Heck (D-WA), André Carson (D-IN), William Enyart (D-IL), Peter Welch (D-VT), and James Moran (D-VA).
A fact sheet on the bill can be found here.