A family member has cosigned a private student loan for a foreign student. If she dies prior to the holder of the loan, is her estate responsible for repaying the loan?
Although default usually occurs when a borrower consistently fails to pay her bill, it could also happen if the co-signer dies before the repayment is fulfilled.
The problem with having a co-signer for private student loans is that some lenders have a policy that puts borrowers in default after a co-signer dies -- even if the borrower is up-to-date on payments. Defaulting on a student loan can negatively impact a consumer's ability to take out further loans, buy a house, and could even injure a consumer's reputation.
The CFPB suggests that lenders should allow borrowers to find a new co-signer if the original co-signer dies or allow them to refinance the loan.