A clause in the private student loan agreements for students in New Jersey and around the country helps to spur the debt burden facing recent graduates. Borrowers who used a parent or other relative to co-sign have recently been forced to pay the entire loan balance right away if that relative passes away. Many borrowers simply do not realize that these clauses exist when they sign the regular agreement, but a family member passing away can leave students few other choices than to accrue credit card debt.
Many recent graduates are saddled with high monthly student loan payments to begin with, especially if they used high-interest private loans to finance their education. As a result, some of these individuals turn to credit cards to help finance other basic needs, but this credit card debt can spiral out of control quickly. Especially when newer graduates take on jobs paying less than they expected, credit card debt can be exacerbated.
A “pay in full” request received after the death of a co-signor magnifies grief and increases the financial chokehold on the younger borrowers, who may find themselves incapable of making ends meet. Taking out credit cards in the short term might help to meet a few responsibilities, but most of these borrowers are never able to get back on track, feeling trapped by their financial situation.
One way to a fresh start when buried under credit card debt is to consider bankruptcy. Filing for bankruptcy can help a younger individual who has been hit with the negative consequences of the immediate repay clause buried in some private student loan agreements. An experienced attorney may be able to assist those who find themselves dealing with high credit debt or other financial challenges.
Source: New Jersey Herald, “Grieving borrowers told to repay student loan,” Kimberly Hefling, April 22, 2014