Cosigning a Loan

Cosigning a Loan

Many younger students need help qualifying for loans to pay for college and pursue their educational goals.

That’s where cosigners come in!

Student applicants with a cosigner are more likely to have their loans approved, enabling them to build their own credit history. But be aware -- approved cosigners are equally responsible for repaying the loan if the borrower fails to do so.

If you received an email invitation to cosign a loan, read on for more information!

  Before you cosign a loan, make sure the student exhausts any lower-cost federal options.

  Parents and family members may consider applying for an Alaska Family Education Loan.

  This is a long-term commitment so make sure you keep copies of all important documents.

  Be sure to stay in touch with the primary borrower and ACPE.

  • Before You Cosign
  • Who Can Cosign?
  • How to Cosign
  • Credit Requirements
  • Loan Repayment

Before you cosign, think carefully about your ability to repay the debt and your responsibilities as a cosigner.

Important considerations about being a cosigner:

 As a cosigner, you are agreeing to repay the entire amount of the student loan if the borrower does not pay, or even if the borrower dies or becomes disabled. Review the loan repayment tab to understand the financial obligation you are agreeing to and the monthly payments you would have to make.
  • Cosigned loans may appear on your credit report, and creditors may consider that debt as yours.
  • The loan status is reported to nationwide consumer credit agencies each month. Your credit report will reflect payment delinquencies if neither the primary borrower nor you make timely payments.
  • Cosigning a student loan is usually a long-term commitment. Cosigners cannot be released from the loan obligation. For example, the standard loan term for an Alaska Supplemental Education Loan (ASEL) is 10 years.
  • If the borrower does not pay as agreed, ACPE will attempt to collect the debt from them and you. If payments are not made, you may be subject to wage or Permanent Fund Dividend garnishment, liens on your property, and transfer to collections with associated collections costs.
  • Student loans are rarely dischargeable in bankruptcy. If you are the cosigner on someone else’s student loan, in most situations you cannot discharge your obligation to repay that loan unless you meet specific undue hardship standards.

 

A cosigner can be a parent, legal guardian, grandparent, spouse, relative, or even a friend.

To be approved as a cosigner, you must:

  • Be a legal adult of 18 years or older
  • Be a U.S. citizen or eligible non-citizen
  • Have a FICO credit score of 680 or higher

Cosigner/Borrower Relationship

Be sure to understand the implications to you of cosigning. As a cosigner, you and the primary borrower share the responsibility of repaying the loan. You may need to communicate with the other party about repaying as agreed because if your family member or friend fails to repay as agreed, it will be up to you to do so.

 

Cosigners
If the borrower submits your name to ACPE as a potential cosigner, you will be sent an invitation by email. If you are prepared to do so, select the application link in your email invitation. To get started you must have the application and cosigner identification numbers provided in your invitation.

Borrower
If you have invited a cosigner to apply, you can check your application status, or invite an alternative cosigner, by logging into your online account.

 

Loan approval depends upon borrower and/or cosigner credit worthiness and meeting other eligibility criteria. Other factors such as prior default on ACPE loans or past due child support obligations may impact eligibility.

 

Alaska Supplemental Education Loan (ASEL)

  • Borrower - FICO credit score of 680 or higher
  • Cosigner - FICO credit score of 680 or higher

Alaska Family Education Loan (FEL)

  • Borrower - Absence of bad credit
  • Cosigner - FICO credit score of 680 or higher

For more information on credit, view our Understanding Credit section.

 

Loan Repayment Examples
The following loan repayment examples are calculated assuming the student remains in school for four years and has a six-month grace period before the first payment is due.

The current 2015/16 interest rate and a ten-year repayment period are used in this calculation.

Amount  Financed

Interest
Rate

Loan
Term

Estimated Monthly Payment

Total to be
Paid

$10,000

6.25%

10 Yrs.

$140.77

$16,929.60

$12,500

6.25%

10 Yrs.

$176.35

$21,162.00

$14,000

6.25%

10 Yrs.

$197.51

$23,701.20


As a cosigner, it is important that you stay informed of the status of the loan(s) you cosigned. Both the primary borrower and cosigner are sent repayment disclosures, monthly billing statements, and notices of delinquency when a loan is 30 or more days past due in payment.

Repayment Assistance
Many repayment assistance options such as deferment and forbearance are not available to cosigners. However, if the primary borrower is having trouble making their payments, ACPE offers a variety of repayment options that may help. Encourage the borrower to contact us for information and support during times of financial difficulty. For more information, review our Loan Repayment section.