Blog

College Grads Are Falling Victim to the “Death Clause”!

By Cliff Keith and Team

 When buying a home many College Grads Are Falling Victim to the “Death Clause”! Don’t let the “Death Clause” causes you not able to buy a home. Home-buyers now have another thing to worry about beside competition from fellow home-buyers

 Did you agree to student loan? Are you current and up-to-date with the terms of your student loan? It doesn’t matter, you are in for a huge shock!

 There is a new report  released this week by the Consumer Financial Protection Bureau stating and warning student who borrowed money from “privately funded lenders” about how they are in “default” if their co-signer of their student loan dies or goes into bankruptcy.

 That “catch” phrase in the student loan documents states that student loans will automatically default when a co-signer of the loan dies or goes into a bankruptcy. This co-signer is usually your parent(s) or grandparent(s).

 What happens in most defaults is that the lenders usually want the full amount of the loan paid off immediately, (known as “acceleration of the loan”). This is true even if the student is current with the loan and has a perfect payment history.

 Besides most students not having the total amount available, (average student debt in America is $31,000), to pay off the student loan, this loan also creates havoc on the student’s FICO scores aka bad credit. This in turns hurts the students who are new to the market place for a job during the employment screening process.

 How will the students be able to pay off their student loans without a job? To me this seems insane and not very good business practice on the part of the lender even if it is legal!

 There are federal consumer agencies trying to help this situation by requesting lender give extra time to find another co-signer and urging lenders to take the necessary steps to stop these forced defaults by not “accelerating” the loans.

 They would also like the lenders to have in place “greater transparency” to the student applying for student loans. The consumer agencies would also like the lenders, before the loan if approved, to point out to both the student and the co-signer the “fine print” in the loan documents about factors that would cause a default.

 As one would expect there has been more than 2,300 complaints filed with consumer agencies from students who agreed to a private funded student loan. As stated above, all complaints against lenders demands for payment in full, for loans not yet owed, and that are current in their payments.

 To show how big this problem could escalate one only needs to look at the numbers. Today 90% of all private loans are co-signed. This is up from the figure in 2008 of 67%. And, the total loan amount for both private and public student loans has tripled in the last 10 years to over a $1,000,000,000 that’s right over one trillion dollars!

As a point of interest, student loans cannot be cured through a bankruptcy proceedings they are still due in full. If you have a private student loan do whatever you can to pay them in full as soon as you can. You will sleep easier and relieve yourself of undue stress.

 If you are in the market to buy or sell a home call/text/email Cliff Keith and Team to help you meet your real estate needs. We have been helping people with their real estate needs since 1976. Put a winner in your corner. Hire Cliff Keith and Team as your Realtor for Life!