The details matter when it comes to getting a signature on your student loan agreement: it turns out that some private student loans have a caveat for what happens if the co-signer passes away. In some private loans, the student or recent graduate has to pay up if their relative passes away- immediately and in full. If the borrower can’t make that payment, he or she faces a big hit on their credit rating.
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Many students who have to use private loans to finance their education might not even notice the provision, but it’s legal. Receiving a notice for demanded payment in full often terrifies a recent graduate, who may ignore the notice and suddenly feel buried financially. Borrowers can have their loans released after a few years of earnings and positive credit history, but they also have an option to transfer to another co-signer. Unfortunately, not many students are aware of these options right away.
When it comes to student loans, it’s important to read all of the stipulations in the loan agreement, especially when it’s a private lender. Make sure you walk through all of your options if a parent does pass away, too. No one plans for the situation where a parent or relative passes away in this manner, but it’s worth factoring into your general estate plan if you are a co-signer on someone else’s loan. Ensure that the borrower knows and has a plan for how they would handle such a situation. To learn more about a comprehensive estate plan, contact us through email at email@example.com or contact us via phone at 732-521-9455 to get started.