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How would you feel if you received a letter demanding a $10,000 retroactive 'down payment' on a loan you have been diligently paying off for years? While this may sound like something from a dramatic comedy, it is happening to an untold number of individuals trying to pay off their student loans who unexpectedly lost a co-signer for their student loans. For no fault of their own, these individuals are now being targeted by Sally Mae for 'auto-defaulting.' You read that right--you can never miss one payment, but if your co-signer dies, you are automatically considered in default by Sally Mae.
The Student Loan Marketing Association, better known as Sally Mae, has made a huge business out of giving federally guaranteed student loans to millions of students since 1972 and has been rather successful throughout their short history. They have built up a sizable war chest of $181 billion and have an annual income of just under one billion.
While many people are of the mistaken belief that Sally Mae is a governmental agency, they are in fact a private company whose loans processed prior to July 2010 are guaranteed by the Federal Government. This means that Sally Mae will get their money no matter what you do.
So, beware: you may be staring down a massive payment on your student loans if your co-signer passes away, regardless if you are up to date and your co-signer hasn't paid one penny towards your loan. It is important to know what you are getting into before you sign your student loan papers. You should be aware of your rights AND responsibilities
before taking out your student loan. You have many rights when it comes to your student loans, but you also have plenty of responsibilities that you need to be aware of.
One lesson we all must learn is how important it is to read the fine print before you sign on the dotted line. If you don't, then you may be one of the countless individuals who are now grappling with the unimaginable prospect of a $10,000 retroactive 'down payment' if your co-signer dies.