The U.S. House of Representatives on Sept. 28 passed the Christopher Bryski Student Loan Protection Act (H.R. 5458), which would require lenders that issue private student loans to provide additional information to co-signers about their financial obligations on the student loans they co-sign following the death of the primary borrower.
Private student loan issuers would also have to offer information to borrowers about filing a durable power of attorney (DPOA) nomination that would permit another person to make financial, legal, and medical decisions in the event of death or disability of the primary borrower while any of the borrower's private student loans remain open.
A Student Loan Bill With Its Roots in a Family Tragedy
This student loan protection act was sponsored by New Jersey Democratic Rep.
John Adler and was named after Christopher Bryski, a 23-year old college graduate who suffered a serious brain injury in a 2003 accident and died in 2005, after spending two years in a persistent vegetative state. While in college, Bryski had taken out nearly ,000 in private student loans, for which his father had co-signed. After Bryski's accident, his private college loans defaulted, and the lender sought repayment, along with interest, from Bryski's father.When a student borrower dies or becomes permanently disabled, the balance of any government-issued student loans the borrower had is typically discharged.
In the case of non-federal, private student loans, however, the lender will still seek repayment from the co-signer.The proposed law is not designed to force private lenders to discharge student loan debts for deceased borrowers, but rather to disclose the co-signer's responsibilities in case the borrower dies or becomes incapacitated while a student loan balance is outstanding. Co-signers guarantee loan repayment but often lack the legal standing to handle a primary borrower's finances should a borrower become incapacitated, as occurred in the Bryski case.
The law would also require university financial aid offices to make similar disclosures to students who are applying for private student loans.
Legislation Could Spur Borrowers to Seek Insurance Protections for Private Student Loans
Should the legislation pass both houses of Congress, it is likely to change the landscape for borrowers and co-borrowers when it comes to the repayment of private student loans.
The bill carries no insurance provisions for student loans, but savvy co-borrowers may be more apt to look into student loan insurance plans, life insurance plans, and other financial protection strategies that could pay off the balance of the student loan if the borrower dies or becomes completely disabled, leaving substantial student loan debts.
Life insurance will generally only pay off an insured borrower's private student loans if the borrower dies. However, disability insurance or student loan insurance packages could pay off outstanding college loans if the primary borrower defaults under other circumstances.
The new law would also require private lenders to offer entrance counseling to borrowers to encourage them to set up a DPOA. Borrowers would not be obligated to actually establish a DPOA or other advance directive, but advocates of the bill hope that the counseling requirement could open the door for better communication between lenders and borrowers, as well as between borrowers and co-signers.
The bill now heads to the Senate, where Rep. Adler hopes to find both a sponsor and a receptive audience to the plight of families who may have to assume substantial student loan debt following the incapacity or death of a student borrower.