CHARLESTON, WV -
The West Virginia Association of Student Financial Aid Administrator's Spring Conference is a chance to learn what's new, but also to review current policies. Student loan borrowers are waking up to a harsh reality. Some private loans contain a clause that requires the borrower repay the loan in full upon the death or the bankruptcy of the loan's cosigner.
Brian Weingart, Senior Director of Financial Aid with West Virginia Higher Education Policy Commission, has experienced the effects of this particular clause. He recalls a student's grandmother cosigned the student's loans. While the student was still attending college, the grandmother died and the lender demanded the student pay the loan in full. Weingart says the student defaulted on the loan because it was impossible to pay in one lump sum.
This clause will not be found in your federal student loans, only private loans and not every lender uses this clause. The key is to read the fine print. Weingart explains with a laugh that in most loan agreements people don't read all the fine print and disclosures.
The clause acts as a safety net for the lenders. Weingart explains that the loan is at risk of not being paid back without the support of a cosigner, since the student wasn't qualified financially by themselves to take the loan. Many borrowers, like the student Weingart remembered, default anyway because they cannot pay the lump sum immediately.
Some lenders and financial aid advisors recommend students also have a safety net ready. JoAnn Ross, Director of Student Financial Assistance at West Virginia State University, suggests students take out a life insurance policy on the cosigner that would cover the amount of the loan. Financial aid advisors also highly recommend students always take advantage of federal financial aid before taking private loans.
350 Quarrier Street
Charleston, WV 25301
Main (304) 343-1313
Fax (304) 343-6138