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The recently signed banking bill by President Donald Trump brings new regulations aimed at offering more options and peace of mind for private student loan borrowers.
Private student loans typically offer fewer protections and less flexibility compared to federal loans, but this bill introduces two key provisions to aid borrowers, as reported by CNBC: it alters the way defaults are reflected on credit reports and changes how private lenders handle the death or bankruptcy of co-signers.
The first update affects how defaults are reported on credit reports: If a borrower defaults but enters a loan rehabilitation program and stays on track with payments, they can request the removal of a default mark from their credit report once per loan. (It’s important to confirm your lender provides a rehabilitation program before committing to a loan.)
The second major change prevents private lenders from declaring a loan in default or accelerating repayment if a co-signer passes away or files for bankruptcy. Additionally, if the student borrower dies, co-signers will be freed from any remaining debt obligations.
These two provisions will apply to private loans taken out 180 days or more after the bill is signed into law.
As I wrote here, the bill also makes credit freezes free of charge and extends credit fraud alerts from 90 days to a full year, providing two additional benefits for consumers.
