A top official at the Consumer Financial Protection Bureau on Tuesday said student loan companies are at risk of breaking the law if they place people in default when the co-signer of their loan dies or declares bankruptcy, signaling that the bureau may start legal action. These “auto defaults” leave borrowers with no choice but to repay the full balance or ruin their credit, making it difficult to purchase a home or car. The practice occurs in the private student loan market, where banks and other financial firms provide education financing with loan contracts that give them the right to trigger a default, even if the loan is being paid on time. Despite asking lenders to strip the clause from their contracts, bureau officials say many have not and are skirting the law by unfairly invoking the clause.

March 8, 2016 ・ From The Washington Post