Author Topic: Private Student Loan in Good Standing + Death of Co-Signer = Automatic Default?  (Read 170 times)

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fg2000

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So, I'm pretty sure that I'm stuck in my current situation, but I'm wondering what my options are in this situation. I have a Private Student Loan that was originated through Citi/Student Loan Corporation for $19000. And since the grace period expired 3 years ago, I have been making on-time payments, and my credit file shows that it is "current - paying as agreed".

However, in the middle of July, the co-signer of my loan died unexpectedly. Fast forward to last week, I get a notice in the mail from Capital Management Services saying that the loan has been placed with them by Citi, and now the total loan balance has been accelerated. When I contacted Citi, they said that in the MPN (Master Promissory Note) that we signed, it indicated that in the event of death of the co-signer, the loan is deemed to be in default automatically. So, even with 38 months (Citi took July and August's payments), they won't take the loan back and allow me to repay as agreed to.

How should I handle this situation, and am I completely ?

Note: All other loans are still current (including another private loan through Discover/Student Loan Corporation), and I'm on IBR (Income Based Repayment for my Federal loans)

CleaningUp

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Have you verified that the loan document says what they claim?

Unlikely that is says something different, but it is wisest to check it out for yourself.

You say that the co-signer is deceased?  Are you a beneficiary of the estate?  If so, once that tax situation and all bills have been identified for the estate are resolved, executor will allow the beneficiaries to draw on the bequests in the form of loans (with interest charged) pending final distribution of estate assets.

fg2000

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I have verified the MPN, and it does show the Automatic Default Provision.

Yes, my dad was the co-signer and he died in a car accident, and his estate went to my mom, so I'm assuming that the estate has $0 in it.

CleaningUp

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That's not the question.  Do you have any beneficial interest in the estate.

You may want talk with your mother about the situation and see if she can help.  She might be willing to co-sign a loan with a bank or lend you the money to make the creditor whole. 

You're not going to get that favorable interest rate with a new lender, but your mother may just give you a loan interest free.

fg2000

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Ah. I do not have any beneficial interest in the estate.

When I contacted Citi, I asked them whether my mom could co-sign, and they said that since they no longer originate student loans, that would not be possible.

CleaningUp

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You may have to apply for a new loan somewhere.

fg2000

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I've attempted, but it's already hit my CR as a derogatory mark, so I'm fairly certain that I'm stuck.

jacko

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Need to bring back consumer protection to student loans.

CleaningUp

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Welcome to the real world.

You read the contract.  Your parents read the contract.

You signed the contract. Your father signed the contract.

Its not that I don't sympathize with your plight and think that Citi is acting reasonably.

But, that's the way things go, and the law is on their side.

I hope you have learned one of life's important lessons:

Read every thing that you sign, and don't sign anything that you can't live with when push comes to shove.  Sometimes NOT taking the golden ring is better than grasping for it.