Posted on Aug 11, 2015

On August 5, 2015, Senator Robert Menendez here in New Jersey introduced the Christopher Bryski Student Loan Protection Act, which is supposed to provide better financial protections for borrowers and co-sigenrs in the event of severe injury or death. Rep. Bill Pascrell, Jr., also of NJ, is to introduce the House version.

The bill is named after a New Jersey college student who died, leaving his co-signer father with tens of thousands of dollars of defaulted student loan debt. It was originally brought in 2009, but has not become law in the intervening five years. Sen. Menendez first introduced this bill last year. There are three main goals of this law:

Protecting Students and Their Families During a Time of Loss

One of the bad things about private student loans is that they can be declared in default because the borrower or a co-signer dies, even if payments were current at the time. This can also be true of disability or a bankruptcy filing. The practical effect of this is that the entire balance falls due and must be paid immediately! This bill, if passed into law, would prevent this from happening.

Federal student loans actually go further than this by offering forgiveness of the loan upon the death of the student and, in the case of a Parent PLUS loan, the death of the parent. Also, should a borrower become totally disabled, forgiveness is offered as well. Loans are also not defaulted if the borrower or co-signer files bankruptcy. 

Providing Automatic Co-Signer Release When Loan Criteria Met

Many private student loans have terms that allow for the release of a co-signer once the borrower meets certain payment and credit conditions (students usually do not have a credit history of their own while in school).

Unfortunately, the lenders do not make it easy to do this, and don’t exactly spotlight the provisions in the loan documents, which results in very few borrowers having this provision in the loan successfully getting the release. This bill would have the release happen automatically once the criteria are met, and prevent lenders from being unduly restrictive with said criteria.

Improving Disclosure of Co-Signer Obligations

Lenders would be required to describe in writing, “clearly and conspicuously,” a co-signer’s obligations on a loan, including the effect of the death or disability of the borrower or co-signer. Student loan borrowers will also have the option of designating someone to have the legal authority to act on their behalf in the event of death or disability.

This Bill Needs to Pass!

This is certainly a needed law, and I hope that it gets enacted. It has been languishing in Congress long enough. I have had several clients have to file bankruptcy who had current private student loans. They faced default on the one obligation they have managed to pay and which is extremely difficult to discharge!

It is also in the best interests of the lenders, as the cash flow created by the current payments would continue, as opposed to the delays and nonpayment created by the sudden demand for the balance and efforts to collect same. Hopefully this bill will be enacted this Session and give many borrowers and co-signers the relief that they need.

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Steven J. Richardson
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Bankruptcy, Collections, Student Loan, DUI and Traffic Court attorney in Woodbury, NJ.