1. Short title
This Act may be cited as the “Protecting Students From Automatic Default Act of 2014”.
Protecting Students From Automatic Default Act of 2014
A BILL
To amend the Truth in Lending Act to establish requirements for the treatment of a private education loan upon the death or bankruptcy of a cosigner of the loan.
2. Requirements for private educational lenders
In general— Section 140 of the Truth in Lending Act (15 U.S.C. 1650) is amended by adding at the end the following new subsection:
“(g) Death or bankruptcy of a cosigner on a private education loan
“(1) In general—Notwithstanding any provision in a private education loan agreement, a private educational lender shall immediately notify a borrower if, upon receiving notification of the death or bankruptcy of a cosigner who is jointly liable for the private education loan, such lender deems the borrower to be in default, changes the terms of the loan, or accelerates the repayment terms of the loan.
“(2) New cosigner—A private educational lender shall provide a period of time of not less than 90 days, beginning on the date such lender issues the notification described in subsection (a), for a borrower to identify a new cosigner for the loan. Such lender shall retain the right to renegotiate loan terms based on the creditworthiness of the new cosigner.”
Rule of construction— The amendments made by this Act shall apply to any private education loan agreements in existence on the date of enactment of this Act or entered into after the date of enactment of this Act.