So, you’ve taken out a private student loan to pay for your college education. You are one of the thousands of students who have also chosen to finance their education.
You might have a plan for how you’ll tackle the threat of student debt; however, life is unpredictable which can make managing your private student loan difficult. Federal protections have made dealing with unplanned circumstances easier. Find out if you can take advantage of these protections.
Handling bills and loan payments are challenging and defaulting on your loan could be harmful to your credit report, but consumer rights may protect you.
The Fair Credit Reporting Act gives borrowers the right to exclude a private student loan default from their consumer’s report. The borrower must successfully complete a loan rehabilitation program before they can request the exclusion.
Why is this important?
Consumer reports are reviewed when you apply for auto loans, submit job applications- even when you apply to rent an apartment! So, if you want to get out of mom and dad’s house, check with your lender to see if they offer a loan rehabilitation program.
Your co-signer tells you that they filed for bankruptcy. What happens after that?
The private student loan lender relies on the co-signer to pay the loan debt if the borrower defaults. If the cosigner declares bankruptcy, the lender could default your loan even if you are current on payments.The Truth in Lending Act protects borrowers against lender’s defaulting your loan if the co-signer is unable to fulfill their duty.
Unfortunately, this protection only applies to borrowers who extend their loan after November 20, 2018. The Lending Act protection does not extend to private student loans combined with other private student loans. Loans whose co-signer is the borrower’s spouse are not protected by the act.
So, if your co-signer tells you that they filed for bankruptcy, take relief in the fact that your loan is still secure.
What happens to your private student loan if you or your co-signer pass away? It’s a question that most people don’t think to ask, but federal regulations have this problem answered for you.
Similar to the bankruptcy regulation, the Truth Lending Acts barred lenders from defaulting or accelerating payments if the cosigner passes away. Cosigners are also relieved of loan obligations upon the borrower’s death.
You may not have thought about how a death could affect your loan, but protections in place already have you covered!
Private student loans are a strategic way to fund your education!
Protections established by the Fair Credit Reporting Act and Truth in Lending Act can alleviate some of the stress that comes with private student loans. These acts allow borrowers to exclude negative information from their credit loan report, ensuring that loaners do not accelerate or default loan payments, and protecting co-signers.