How to Remove a Cosigner from a Student Loan
Since student loan borrowers typically have limited credit history and income, the vast majority of student loans are cosigned. However, as your earning potential increases after graduation, or as your financial circumstances change, you may wish to release your cosigner from the loan.
Releasing a cosigner from a student loan is a fairly common process, however, lenders typically make doing so difficult. The following article breaks down multiple options for removing a cosigner from your student loans and explores the potential benefits of cosigner release.
Reasons Your Cosigner Might Want Cosigner Release
Typically, the cosigner for a student loan is the borrower’s parent/s. There are numerous reasons that a cosigner may want to be released from a student loan, and we explore a couple in this section.
Your Cosigner Will No Longer Be Financially Responsible
Agreeing to cosign for a student loan is a huge financial obligation, considering that the average student loan amount for borrowers is over $30,000. The cosigner must take over this debt if the primary borrower fails to repay the loan.
Once you are through school, your parents may wish to shift this responsibility entirely onto you as you become financially responsible and independent. Obtaining a cosigner release would free the cosigner from this obligation.
Your Cosigner’s Credit Won’t be Affected
Part of the obligation of cosigning a student loan is that, if the primary borrower fails to make payments, the cosigner’s credit is damaged. Cosigners can get extremely frustrated with having their own financial health and stability tethered to the financial decisions of another. Obtaining a release means the credit score of the cosigner will be disconnected from the student loan entirely.
Reasons You Might Want Cosigner Release
Sometimes, the primary borrower himself wishes to have their cosigner released. We listed some benefits below.
Lower Your Interest Rate
Lenders determine your interest rate by assessing the strength of your finances, along with your cosigner’s finances. When you remove a cosigner by refinancing, your new lender will assess your finances and may come to a different judgment than your original lender. If your financial situation has improved– perhaps your income or credit score has gone up since you took out your loans- removing a cosigner can get you a better rate.
Lower Your Monthly Payment
If you can qualify for a lower interest rate, then, inevitably, your monthly payments will also decrease. Inquire with your lender about the requirements for removing a cosigner, and see how they determine whether you are eligible. Otherwise, you can explore refinancing with a different lender. If you can meet their requirements and will qualify for a lower interest rate, you will save on monthly payments and overall interest.
If you remove your cosigner by refinancing, then you can change lenders as well. If your lender is unresponsive, has poor customer service, or inflexible terms, getting a new lender can be hugely beneficial. Get quotes from multiple lenders on refinancing and see if the terms and rates that they offer are superior to your current lender.
How to Remove a Cosigner from a Student Loan
There are multiple approaches that you can take to remove a cosigner from your student loans. The next two sections discuss these options and explore which may be suitable for you.
Apply for a Cosigner Release
The most direct way that you can release a cosigner is by reaching out to your lender and applying for a cosigner release. Each lender has different requirements for cosigner release, and your lender may ask for:
- Proof of income
- Proof of graduation
- A minimum credit score
- A certain number of consecutive on-time payments
Sallie Mae, one of the largest student lenders in the country, has provided a list of their requirements that you can use as an example. Contact your lender and find a comparable list that you can review. If you can meet the requirements of your lender, then collect all of the necessary documents and either mail or email them to the lender.
However, many lenders discourage releasing cosigners by making the process difficult and are unresponsive to such applications. Make sure you are persistent in your efforts, keep a record of any communication, and follow-up if the lender is unresponsive.
Refinance or Consolidate Your Student Loans
Considering how lenders purposefully make releasing a cosigner difficult, it is perhaps simpler to release a cosigner is by refinancing or consolidating your student loans. The process is quick and easy: you take out another loan with a different lender and use those funds to pay off your student loans. The cosigner for the original loans will be released from any obligations once the original loans are paid off.
How to Get a Personal Loan to Remove a Cosigner
The process of qualifying for a personal loan to refinance your student loans is the same as qualifying for a regular personal loan. First, you submit an application with the lender detailing your finances, your current student loans, and other important personal information. You will likely receive a response within a few days, and, if you are accepted, you will qualify for an interest rate and loan term.
Most borrowers obtain a lower interest rate upon refinancing, and, if the terms your new lender offers are agreeable, you sign a promissory note accepting the loan. Then, the lender pays off your student loans, and you begin making payments on your new loan.
There are numerous ways to remove a cosigner, but your lender may obstruct or delay the process. Refinancing or consolidating is a simple way that you can avoid dealing with unresponsive lenders. Furthermore, refinancing can help you obtain a lower interest rate, and more favorable terms as well.