What to do if you become a student loan cosigner through forgery
Key takeaways
- People may forge your name as a cosigner to help them get approved for a student loan.
- Cosigners share the debt liability, making them equally responsible for payments.
- To deal with this identity theft, you can freeze your credit reports, file a report with the Federal Trade Commission and dispute the cosign agreement with the credit bureaus and loan servicer.
Becoming a student loan cosigner through forgery is a form of identity theft, and you can take action to prevent it from damaging your finances. You should report this identity theft to the police immediately and file a report with the Federal Trade Commission (FTC).
Understanding what additional steps to take is crucial in recovering your identity. Disputing the account with all three credit bureaus — Equifax, Experian and TransUnion — after you’ve filed a report can help you get it removed from your credit reports.
What should you do if you’re a victim of student loan fraud?
Finding out that you’re a victim of fraud can be unnerving. And if you discover that a family member or friend forged your name on a student loan, the betrayal can make the situation even worse.
If you became a cosigner through forgery, there are some steps you can take to recover. The three steps you should take start with freezing your credit to prevent additional fraud.
Freeze or put a fraud alert on your credit reports
Federal law allows you to freeze your credit reports with Equifax, TransUnion and Experian at no charge. However, you will need to visit each credit bureau website individually to take advantage of this right.
Placing a security freeze takes your credit report out of circulation, so no future lender can access it unless you unfreeze your report first. This won’t undo any past fraud, but it can prevent someone from opening new fraudulent accounts in your name as a cosigner or primary borrower.
Once you’ve dealt with the initial identity fraud, you can unfreeze the credit report and place a fraud alert on your account. A fraud alert will cause the credit bureau to verify your identity before allowing new lines of credit to be opened under your name. Basic fraud alerts can last one year on your credit report or seven years with an extended fraud alert.
File an identity theft report
When someone uses your personal information to fraudulently open a credit obligation in your name, it is a form of identity theft. You can visit IdentityTheft.gov to report the theft to the Federal Trade Commission. You can also call your local police’s nonemergency number to file an official police report.
Dispute the cosign agreement
Once you have an official identity theft report from the FTC or another law enforcement agency, you can send a copy to all three credit bureaus and the student loan servicer. When a credit bureau or loan servicer receives your dispute and ID theft report, it must remove and block the information from your credit report within 30 days per the Fair Credit Reporting Act.
Why would someone forge a cosigner signature?
To qualify for a private student loan, borrowers typically must have a good credit score, a low debt-to-income (DTI) ratio and a steady income. If a borrower cannot satisfy all of a lender’s requirements to borrow, some companies provide the opportunity to add a cosigner, whose credit score and financial history are used to determine private student loan interest rates and terms.
Getting a cosigner has the potential to help borrowers secure the financing they need when they can’t qualify for a private student loan on their own. Yet some student borrowers are unable to find a loved one with good credit who is willing to accept the risk of cosigning.
Unfortunately, some would-be borrowers take their frustration too far. It’s not unheard of for someone to fake cosigner information under the name of a friend or family member so they can get the financing they want or to get a lower student loan interest rate. No matter what the motivation, forging someone else’s name on a loan application is loan fraud, and it’s illegal.
What are the consequences of being a cosigner when you didn’t sign up to be?
Someone adding you as a cosigner without your permission can have several negative consequences. The debt will be added to your credit reports, increasing your debt-to-income ratio. As a result, it can make it more difficult for you to qualify for an auto loan or mortgage.
Another consequence is that it can affect your credit score. When someone adds you as a cosigner, a lender performs a hard credit check to review your credit history, which may temporarily ding your credit. Then, if the person who added you makes a late payment, it can count against your credit payment history and cause your credit score to suffer a more significant drop.
Furthermore, if the student suddenly can’t or decides not to pay, you’ll be responsible for the full student loan repayments. Not paying the student loan could then result in a student loan default, damaging your credit score for seven years.
Since you didn’t sign up for this kind of responsibility, it’s important to treat the cosign agreement as fraud and get your name removed from the loan.
What are the legal rights of a cosigner?
Cosigning for a loan (or any other type of credit) is a major financial commitment — it’s as serious as if the cosigner is taking out a loan for themselves. When you cosign for someone else, you’re equally responsible for the debt. If the primary borrower fails to repay, the lender could come after you to try to collect the debt, and your credit could be damaged as a consequence.
Many lenders are not willing to release cosigners from loans, even after the primary borrower has put themselves in a position to qualify for financing on their own. Instead, if you want your name to come off a loan as a cosigner, the primary borrower may need to try to refinance the debt in their name only.
However, there are some exceptions to this rule. Some student loan companies offer a cosigner release after the primary borrower meets certain requirements. Those requirements may include making a minimum number of on-time payments or a demonstration that they can make the remaining payments on their own. Yet even if a cosigner release is an option, the request must typically come from the borrower.
In the case of forged cosigning, the only way to circumvent these legal requirements is to file a fraud report and dispute the forgery with the loan servicer. Then, the loan servicer should remove your name from the loan.
Bottom line
You have rights as a victim of fraud. You can report the crime and make sure that the fraudulent account is removed from all three of your credit reports and the student loan agreement. That way, the cosigned loan won’t cause damage to your financial records.
