Bishop Proposes Safeguards for Private Education Loan Borrowers
Rep. Tim Bishop (D- NY) yesterday introduced a bill to protect private education loan borrowers from automatic default if a cosigner dies or declares bankruptcy. Complaints from borrowers in such circumstances prompted the Consumer Financial Protection Bureau (CFPB) to issue an advisory and a report on this issue.
Bishop’s bill would amend the Truth in Lending Act (TILA) to require lenders of private education loans to:
- Notify a borrower immediately if, as result of a cosigner’s death or bankruptcy, the lender deems the borrower to be in default, changes the loan terms, or accelerates the loan; and
- Provide a 90-day window during which borrower can obtain a new cosigner.
The bill would preserve the lender’s right to renegotiate the loan terms based on the new cosigner’s creditworthiness. All current and future private education loans would be subject to the new requirements.
NASFAA has signed onto a letter of support for the bill, coordinated by the American Council on Education (ACE).
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