Wells Fargo (NYSE:WFC) introduced Friday new terms to its student loan agreement, forgiving the financial burden should a student beneficiary die or become permanently disabled.
Previously, co-signer’s were required to repay the loan even in the event of a student’s death or disability.
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The forgiveness will be an enhancement added to its existing and future Wells Fargo private student loans used directly to cover education-related expenses.
While language in previous consumer credit agreements clearly states the co-signer’s repayment obligation, future agreements will explain the new benefit.
“When a death or permanent disability occurs, their future ability to repay is compromised,” Kirk Bare, head of Wells Fargo Education Financial Services, said in a statement. “We believe it is important to be responsive to events that affect these unique customers, and their ability to obtain financial independence and repay their loan.”
The bank, which serves more than 2.4 million student and family customers across the nation, said the new policy requires verbal or written notification of the student’s death or injury followed by receipt of acceptable documentation. From there, a Wells Fargo representative will work with the family to complete the required steps necessary to legally forgive the loan obligations.
Once all documentation is received, future or pending loan disbursements and pending or in process loan applications will be canceled.
The move follows the company’s announcement in May of a new funding option called Wells Fargo Student Loan for Parents, which was introduced as a solution to help parents and other sponsors cover their students’ education costs. The bank reduced rates in July, an effort to help consumers tackle higher tuition costs and less available credit.
“Borrowers of student loans are a very unique subset of customers for us,” Bare said. “Formalizing this into our standard policies and procedures ensures that customers and their families who are impacted by these types of unfortunate situations are provided needed relief.”
Wells-Fargo joins Sallie Mae, which already forgives student loans in the event of a beneficiary’s death or disability through its Smart Option Study Loan