Sec. 379. Requirements for private educational lenders regarding discharge of student loans

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Section 140 of the Truth in Lending Act ( 15 U.S.C. 1650 ) is amended by adding at the end the following new subsection: If a private education loan has a cosigner who is jointly liable for such loan, a private educational lender shall include a process for releasing the cosigner from any obligations on the loan and in such process the lender— shall make the criteria for obtaining the release clear, transparent, and easily accessible via the website of the private educational lender; shall notify the borrower if the borrower is eligible to release a cosigner; shall, if denying a request to release a cosigner, provide an explanation for the denial and offer the borrower an opportunity to correct the request; and may not change the terms of the release to impose additional duties on the borrower or cosigner over the duration of the private education loan.

Notwithstanding any provision in a private education loan agreement that contains a process for releasing a cosigner from obligations on the loan, a private educational lender shall, upon receiving notification of the death, disability, inability to engage in any substantial gainful activity, or bankruptcy of the cosigner— notify the borrower about the borrower’s rights under the private education loan agreement regarding the release of the cosigner; and if the borrower continues to make on-time payments (in the amount determined prior to the death, disability, or bankruptcy of the cosigner) on the private education loan, provide a period of time of not less than 90 days for the borrower to follow the process for release of the cosigner before deeming the borrower to be in default, changing the terms of the loan, accelerating the repayment terms of the loan, or notifying consumer reporting agencies (as defined in section 603(f)) of a change in the status of the loan.

In the event of the death, disability, or inability to engage in any substantial gainful activity of a borrower of a private educational loan, neither the estate of the borrower nor any cosigner of such private educational loan shall be obligated to repay the outstanding principle and interest on the loan. For the purposes of this subsection— the term cosigner — means any individual who is liable for the obligation of another without compensation, regardless of how designated in the contract or instrument; includes any person whose signature is requested as condition to grant credit or to forbear on collection; and does not include a spouse of an individual referred to in clause

(i)whose signature is needed to perfect the security interest in the loan; and with respect to a borrower or cosigner, the term death, disability, or inability to engage in any substantial gainful activity — means any condition described in section 437(a) of the Higher Education Act of 1965 ( 20 U.S.C. 1087(a) ); and shall be interpreted by the Bureau in such a manner as to conform with the regulations prescribed by the Secretary of Education under section 437(a) of such Act ( 20 U.S.C. 1087(a) ) to the fullest extent practicable, including safeguards to prevent fraud and abuse. . Not later than the end of the 1-year period following the date of the enactment of this Act, the Bureau of Consumer Financial Protection shall issue regulations to carry out section 140(g) of the Truth in Lending Act.

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Sec. 379

Requirements for private educational lenders regarding discharge of student loans

U.S.C.§ 1650

U.S.C.§ 1087

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