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Death of primary borrower. Some borrowers describe that the process for handling a loan
when the primary borrower dies is not always clear. The death of the primary borrower may
trigger a default, accelerating the balance due and leaving a co-signer, often the parent or
grandparent of the deceased borrower, legally responsible for payment. However, much like
with federal student loans, some private student lenders allow co-signers to apply to have the
outstanding debt cancelled. Co-signers complain that information about discharge or alternative
arrangements in the case of death of the primary borrower is not readily available and that
decisions are made on a case-by-case basis, giving co-signers little understanding of how the
process works or if they will be successful.
We heard from family members of deceased borrowers who had been contacted by debt
collectors seeking to recover private student loan debt. When families inquired about loan
cancellation or other arrangements, some were unable to obtain answers either by phone or by
sending written requests directly to debt collectors.
Disability issues. In contrast to federal student loans, some borrowers who have become
totally and permanently disabled subsequent to entering repayment may be unable to have their
private student loans forgiven. Some borrowers did not realize this difference between private
and federal student loans existed.
We heard from a borrower who said that his private student lender informed him that disability
discharge was unavailable. The borrower is suffering from kidney failure and has no income
other than his disability checks. He is unable to afford his monthly payments and has no choice
but to default on his loan. The difference between federal and private student loans in periods
of disability was not well-understood.
Off-hour collection calls and do-not-contact notices. Some borrowers report receiving
collection calls late in the evening or early in the morning, outside of the ordinary window for
permissible calls as specified by applicable laws.
Borrowers report attempting to request a third-party debt collector cease collection calls, only to
have the written request, sometimes submitted by certified mail, unprocessed by the collector.
6
Accuracy of credit reports. Typically after navigating a special circumstance of loan repayment,
such as bringing a defaulted loan current, borrowers complain that there is a lag or lack of
resolution to an inaccurate credit report filed by the servicer or debt collector.
We heard from a borrower who described that she requested forbearance by phone, only to
discover months later that the request was never processed and that a 90-day past-due balance
had appeared on her credit report. After contacting her servicer, the borrower paid off the past-
due balance on her loan and successfully placed the loan in forbearance. Ninety days later, a
second past-due balance appeared on her credit report. After contacting her servicer again, she
discovered that she was provided with an incorrect loan balance and the negative credit notation
reflected unpaid interest.
Forbearance fees. Some lenders and servicers charge a fee for forbearance. The borrowers
who request forbearance on their loans are typically those who cannot afford to make their
payments. Correspondingly, a monthly charge for forbearance forces borrowers to come up with
money as they attempt to demonstrate that they are experiencing financial hardship.
6
The Fair Debt Collection Practices Act (FDCPA) requires third-party debt collectors to cease attempts to collect a
debt by phone if notified in writing by a borrower to halt collection calls. This does not change the borrowers’
obligation to repay, but guarantees that the borrower will no longer receive collection calls.