SPRINGFIELD, Mass. (WWLP) – Education is expensive and student loans can take decades to pay off. 22News discovered some students are getting a surprise bill in the mail: a bill they simply can’t pay.
Students know they’re responsible for paying off their loans. Some also know they have a cosigner to help pay the loan if needed. However, many don’t know that if that cosigner dies, they have to pay the loan back in full, right away.
“I’m not sure that you should have to pay the loan back immediately but you should be given a certain amount of time where it’s plausible for a person to be able to pay back a loan,” Kevin Minchella of East Longmeadow told 22News.
This does not affect federal loans, which are the most popular kind. It could impact the majority of students who take out private loans. In 2011, Ninety-percent of students had a cosigner on them. The Consumer Financial Protection Board reports that leads to lower interest rates.
According to the Consumer Financial Protection Board, lenders do have this clause in their contracts. Some students told 22News if there’s this much confusion, it should be made more obvious in the contracts for the future.
“It should be very apparent in the most extreme cases that they will have to pay if the cosigner does pass off. I think that it’s very important and that should be one of the first things addressed,” Timothy Garcia of Springfield told 22News.
“People need to read what they’re signing. If they don’t know what they’re signing or they’re not actually reading what they’re signing, probably not a good idea,” said Joe Raschilla of West Springfield.
Many affected borrowers said they had been paying their monthly bills on time. They didn’t understand why they couldn’t continue paying those bills each month, just because their cosigner no longer could.
This is a growing problem because it’s now not just affecting those whose cosigners died. Students whose cosigners reported bankruptcy also found themselves having to pay the loan off right away, too.