Student Loan Cosigner Release Guide: All There Is To Know

A cosigner is an important figure in the realm of student loans from both a borrower’s and a student loan lender’s perspective. For a borrower, a cosigner acts as a source of support and reassurance. If your credit score is lacking, a cosigner can vouch for you and strengthen your application for getting a student loan. For a student loan lender, a cosigner is someone who shares with you the responsibility for the student loan.

But unfortunately, for a cosigner, being one can pose threats to their credit. More often than not, the problem for them is not repaying the debt, but the impact these loans have on their credit. These cosigned student loans appear on their credit report and can adversely affect their credit-to-income ratio. Due to such factors, a cosigner could find it hard to secure a mortgage.

Given such consequences, cosigners may want to be excluded from the student loan. But lenders often want to keep cosigners for a certain period of time since they can hold cosigners responsible for the loan on any day.

It is not hard to remove a cosigner from a student loan. This process can be carried out smoothly if the circumstances are right and is called “cosigner release”.

We will discuss some methods that can be adopted by borrowers to give their cosigners a release from their student loans.

TABLE OF CONTENTS:

Student loan cosigner release request approval
Applying for student loan cosigner release
Refinance your student loans to release your cosigner
Changing student loan cosigner
Repaying student loan in full
Bottom line

Getting your request for student loan cosigner release approved by your lender

Most lenders offer cosigner release after a period of 12 or 24 months, typically. The usual requisite for this to be approved is that the borrower must make at least 12 or 24 consecutive, timely payments towards the student loan.

The borrowers themselves will be required to pass a credit check before their cosigner can be released. The lenders wish to ensure that the borrower can make payments on their own. This is why their previous repayment history is not sufficient for cosigner release, regardless of how regular or timely it is.

But since a borrower’s “creditworthiness” is a subjective term, a company may deny their application for cosigner release on any grounds. This is why an approval is hard to get. Companies prefer to have two individuals responsible for the loan. Lenders do not gain anything by releasing a cosigner.

This approach is recommended for borrowers with very good credit and only if they can not qualify for loans with better interest rates.

Applying for student loan cosigner release

Here is how you can apply for a student loan cosigner release.

Talk to your lender

Contact your student loan lender and enquire about their procedure for student loan cosigner release. There are some things that both borrowers and cosigners are required to know. Get the terms and conditions in writing from your lender so you have clarity about the process and the requirements

Review paperwork and requirements

As mentioned, lenders have certain eligibility and requirements that a borrower must satisfy in order to be able to release their cosigner from the student loan. This may be a certain number of timely payments that a borrower must make towards the loan or any proof of income or proof of graduation and of course, display of creditworthiness.

Keep your paperwork ready. You may need

pay stubs
cosigner release form
Proof of graduation, etc.

Preserve some copies of the same for yourself as well.

Apply for student loan cosigner release

Now you are ready to apply for your cosigner’s release. Send your documents to your lender. You may expect a response within a few weeks. You should follow up with your lender if you do not get a response from your lender.

Even after your cosigner gets released, preserve any relevant documentation to avoid any hassles later.

Refinance your student loans to release your cosigner

If your existing lender does not offer to release your cosigner, you may look to refinance your loans with a different lender.

One of the biggest perks of refinancing your student loans is that you can get better rates. These days, rates can go as below as 2% due to the competition in the market. Most lenders agree to give out student loans without a cosigner

Getting your existing student loans refinanced is easier than securing student loans in-school. This is because graduates are less of a threat than students. They often have jobs and decent credit history whereas college students have no income or credit.

Refinancing is usually done to get better rates on student loans but it can also be an easy and clever way to drop a cosigner. While refinancing, your old loans are paid back in full and a new loan commences. For a cosigner, the loan that was paid off in full shows up as such on their credit.

If while refinancing, you are not able to find a better rate, you will have to make a choice between releasing your cosigner and sticking with the loan that has a lower rate of interest.

Depending on the tradeoffs involved in the outcome of your choice, cosigner release can be a hit or a miss.

Changing Cosigner on a Student Loan

Borrowers may find themselves in a position where they would like to swap one cosigner for another. This can happen due to a number of reasons. Lenders are not very favourable about this move.

Different lenders may have different policies when it comes to cosigner substitution.

If swapping your cosigner is something you can afford to do but your lender does not offer this option, you may again choose to refinance your student loans.Some refinancing firms accept cosigners and do not care if your cosigner is the same as your previous one.

Repay the student loan in full

This is probably the most challenging route to take. If you wish to go about this path, you might want to start by repaying the loan with the highest interest rate first in full. Then you can move on to the loan with the next highest interest and so on. This strategy can help you save a lot of money that will otherwise be spent on interest.

However, if your cosigner has cosigned on a loan that does not have the highest interest rate and their release is a priority for you, you may choose to pay off that loan first.

The bottom line

Getting your cosigner released from your student loan is not impossible, although the standard route is quite difficult. But again, there are numerous other routes you could pursue to achieve the same.

You may want to view this process even as eliminating the cosigned loan in an effort to get the cosigner released from their responsibilities. Refinancing is an option that is recommended and sought after these days. This is the most hassle-free way to go about cosigner release. It can even help you secure better interest rates and lower monthly payments, depending on the terms and offerings involved, which is always a perk.