According to Forbes, the cost of a college education is increasing almost 8 times faster than the increase in wages. In the last decade alone, the price for a college education increased by 25%.
With such high statistics, obtaining a college degree is a daunting task. Student loans offer an alternative form of payment to get through college. But when applying for a student loan, you may be asked to fill a few forms, one of which requires you to list your references. This article tells you all you need to know about references for student loans.
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What Is A Reference For A Student Loan?
A reference for a student loan is basically a person who acts as a point of contact for the lender if they are unable to contact you in the future. The reference is not required to copay or co-sign the loan on your behalf, though they may be called upon to vouch for your character. They are somebody who will always know where you live and will have your address and contact number even if you switch your residence.
Are MPN references contacted?
An MPN or Master Promissory Note is a legal contract that is signed between the lender and the borrower of a federal loan. The MPN contains all the information regarding the loan taken, its repayment, the terms and conditions applicable to it and the interest rate at which it is borrowed. It is signed for a period of up to 10 years and requires the borrower to list 2 references. The lender may contact the MPN for a variety of different reasons but they will most commonly be contacted if the lender is unable to reach you or you start to default on your loans. Therefore, it is important you use references that can be reached easily by your lender and will have knowledge of your whereabouts and your contact number at all time.
In a nutshell, the MPN is a legally binding contract between the student and the lender, where the student promises to repay the loan to the US Department Of Education along with all the accumulated interest and fees. The references on the MPN may be contacted in the event that the student defaults on his loans and the lender cannot reach them via mail or call.
Reference For A Student Loan
The references for a student loan are people that the lender can contact in case you are not reachable by them. The first thing to do when deciding on who to put as a reference is your ties with the person. The federal loan provider states that the first reference should typically be a parent. However, if you are not on good terms with your parents or they are given to changing residences quickly as well, or are not available to fill in as your reference, you may want to consider someone else that matches that criterion very closely. This could mean a relative; an uncle, aunt or grandparent, who may be willing to be a referee for you. Make sure whoever you choose agrees to act as a reference for you as well as be in touch with you for the next five to ten years.
The reference should be a citizen of the United States and should be residing within the country as well. You must have known the reference for no less than 3 years. Besides these conditions, you need to provide maximum information about the references. This includes their mailing address, contact number, full name, relation to you and email address if possible. The information has to be correct and accurate to the best of your knowledge. The references should not share the same address.
References are a good way of proving your credibility to your lender. Listing references like your girlfriend’s dad, best friend or best friend’s sister etc are highly unprofessional and unacceptable. The lender may use the reference to vouch for your character as well. To make sure you don’t have any negative ticks on your portfolio, choose your reference wisely. They will prove beneficial in the long run.
Someone Used Me As A Reference For A Loan
Many people find themselves in an awkward position when lenders start calling them about a loan that has been defaulted. The person being called for the loan is not the primary borrower but has been listed as a reference for the borrower without being made aware of it. Where this is an extremely unprofessional thing to do, it can become quite annoying for the alleged referee. If you find yourself in a situation where someone used you as a reference, there are a few things you can do.
Firstly, check with the company contacting you if the information they have is correct. Your contact number as a reference for a loan is with them because, at some point, you may have confirmed it with them. Ask them to send you any information they may have regarding the borrower and any proof of you being signed on as the reference. The loan may have been taken six or seven years ago that you can’t recall.
If, after going through all the information, you are sure that you never agreed to be the referee in the first place, tell the insurance company clearly. Let them know that you did not agree to be the reference for the person they are contacting you about and are hence, unaware of their whereabouts. If you are still being hounded, block the number.
Secondly, as a reference, you are under no obligation to pay for someone else’s loan. If you are being asked to fill in the place of the borrower, then this is a scam. No insurance company or organization will call you as a listed reference for another person and ask you to pay his or her loan. Report all such calls and block the number.
In the worst-case scenario, the calls may start to interfere with your personal life. You may have to take legal action against the company in this case.
To conclude, a reference for a student loan is a person who will be contacted by the loan company if they are unable to reach you, the student. They have to be credible people who you have had contact with for at least the past 3 years.