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Questions relating to new protections for members and cosigners with private student loans passed under the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155) are addressed in a recent NAFCU Compliance Blog post – especially those regarding borrowers who have designated an individual to act on their behalf.  

Some of the law's new protections for members and cosigners with private student loans include a credit union's inability to accelerate a loan payment in the event of a credit union member's death or bankruptcy. Also, if a member with a private student loan balance dies, the credit union must release any cosigners from the obligation.

NAFCU Regulatory Compliance Counsel Reginald Watson writes that while the language pertaining to these changes is fairly straight forward, there has been some confusion when it comes to the new option for a borrower to designate an individual to act on their behalf. NAFCU has received questions on if this designated individual is obligated to repay the debt if the member-borrower dies, among other similar questions.

"To help clear the confusion, NAFCU's legislative affairs team raised this issue in recent conversations with Congress and we were informed that the idea was to simply allow an individual to assign a 'designee' to specifically handle their student loan payments separate from the executor of the estate," Watson explains. "It seems that Congress intended to provide this option in case a member wanted to separate responsibilities for handling the disposition of debt in their will."

The law's changes to private student loans apply to loans made more than 180 days after S. 2155's enactment, or after Nov. 18. Watson explains that the law also "encourages credit unions to create loan rehabilitation programs that delay or exclude the reporting of private student loan defaults to consumer reporting agencies." He encourages those credit unions that offer private student loans to review the law's provisions.  

NAFCU has resources available to credit unions on S. 2155, including a summary chart with effective dates for some of the statute's provisions.

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