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CFPB Targets Private Student Loan Auto Defaults

Lenders pressure borrowers into repaying student loans in full when co-signers die or declare BK, CFPB says.

By Michael Muckian | Updated on April 22, 2014

If a private student loan co-signer either dies or declares bankruptcy, some lenders are pressuring the borrower to immediately paid the loan in full. The rising rate of “auto defaults” in such cases raised concerns with the CFPB, which issued a report Tuesday on the topic.

The CFPB analyzed more than 2,300 private student loan complaints and more than 1,300 debt collection concerns related to student loan debt submitted over the past six months. Many focused on auto default payment demands issued when co-signers die or declare bankruptcy, even when the loan is current and is being paid on time.

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