We refer to MEFA Undergraduate Loans as “family loans,” because, in most cases, students and parents jointly sign the loan agreement and share the responsibility for borrowing the funds. Generally, a student who wants to borrow money from MEFA to pay for college costs needs a credit-worthy co-borrower, as most students don’t have sufficient credit to qualify on their own. Parents often serve that role, and as a result, they apply alongside the student as a co-borrower with shared responsibility for repayment. MEFA Undergraduate Loans can have up to three borrowers, and while their roles share similarities, there are also some key differences.
What’s the Same?
When borrowers sign a MEFA Loan Agreement, they are equally responsible for repaying the loan on time. This shared obligation means that all parties must take the responsibility seriously to avoid any negative implications. All borrowers will have the same options to make payments and the ability to create an online account with AES, MEFA’s loan servicer, which is the company that collects MEFA Loan payments.
What’s Different?
On a MEFA Undergraduate Loan, the first co-borrower to apply (usually the parent) is designated as the Notice Borrower. As the Notice Borrower they will be sent the monthly billing statement, annual 1098-E tax document, and other notices related to the loan.
All other co-borrowers, including the student borrower, will receive a monthly Co-Borrower Billing Notice. All borrowers will have the ability to create an account on the AES borrower portal where they can view loan details, update their contact information, make payments, and sign up for Direct Debit.
Being a Borrower
All borrowers on a MEFA Loan can decide together who will be responsible for repaying the loan. Though the parent is most often the Notice Borrower, the family may decide to have the student or other co-borrower make all payments. What’s important to keep in mind is that any missed payment affects all borrowers on a loan, regardless of who the family has decided is responsible for making payments. This is the case even if the student led the loan research and application process and intends to manage repayment, with the parent simply signing the MEFA Loan Agreement.
Co-Borrower Release
If a family borrows a Student Deferred Repayment with Co-Borrower Release Loan, the student borrower may apply to release their co-borrowers from their obligation to repay the loan. To be eligible to apply for co-borrower release, the required number of on-time, consecutive payments as required by state provision must be satisfactorily achieved and the student borrower must meet MEFA’s then-current underwriting standards. Student borrowers must submit required documentation when applying. This option is not available for any other MEFA Loan.
Key Takeaways
Before you decide to apply for a MEFA Loan, it’s helpful to understand the details of the difference among borrower roles. It is important to keep in mind that any missed payment affects the credit of all borrowers on a loan. In the event of non-payment, all borrowers are contacted for payment and/or resolution.
If you have questions about any details we didn’t cover, or anything else related to borrowing for college costs, we’re happy to help. Reach out to us at (800) 449-MEFA (6332) or [email protected].
