Adding a cosigner when you are looking to refinance your student loans could help make it easier to qualify and get lower interest rates than if you were to apply on your own.
Despite those benefits, it’s important to also carefully consider potential downsides for the cosigners themselves. If you were to default on the new loan payment, their credit score would be in jeopardy as well. And some lenders may not allow a cosigner to be released from a loan later, even after you have established a positive payment history and are able to manage the loan on your own.
Weighed the pros and cons and ready to move forward with a cosigner? Here’s what you need to know:
How to refinance student loans with a cosigner
What your lender looks for in a cosigner
Understand the risks for your cosigner
How to decide if a cosigner is right for you
How to refinance student loans with a cosigner
The process of adding a cosigner to a loan is similar to applying for a loan, with a few added steps. Here’s the process to follow when you’re refinancing student loans with a cosigner:
1. Find a lender that allows cosigners on student loan refinancing
2. Get a cosigner on board to refinance student loans
3. Collect documents and information needed to apply
4. Compare student loan refinancing rates
5. Apply for student loan refinancing
6. Sign the student loan refinancing agreement
7. Repay the refinanced student loans with a cosigner
What lenders require when refinancing student loans with a cosigner
1. Find a lender that allows cosigners on student loan refinancing
Not all lenders allow cosigners, so your first step should be researching various lenders’ policies. Ultimately, allowing a cosigner isn’t the only credential you should look for in a refinance lender. You want to be sure you’re able to get competitive rates that could actually help you save over the long term as well.
2. Get a cosigner on board to refinance student loans
Hopefully, you have someone in mind who meets the qualifications outlined above to be a good cosigner. You’ll need to ask this person if they are willing to be your student loan cosigner. Make sure each of you understands the risks and responsibilities that come with cosigning before you agree.
3. Collect documents and information needed to apply
You will need to be ready with basic personal information for both you and your cosigner. Collect your Social Security number, employment information, financial information, monthly mortgage or rent payments, and permanent address.
If your cosigner prefers not to share this sensitive personal information with you, that’s OK. They will just have to be involved in the application process to provide their relevant information as needed.
4. Compare student loan refinancing rates
Typically, the first step in applying for student loan refinancing is not a full application, but a credit check. Most lenders ask for preliminary information to perform a soft credit pull. This gives them a snapshot of your creditworthiness and allows them to provide you an estimate of the rates and terms for which you qualify. Then you can compare the rates and terms offered by different lenders.
Whether you include a cosigner at this stage will depend on the lender you choose and how it handles the process of adding cosigners.
5. Apply for student loan refinancing
Once you’ve chosen an offer you like, it’s time to apply for student loan refinancing. Make sure you accurately provide all the information for both yourself and your cosigner. Provide any documentation of income or other financial records the lender requests.
6. Sign the student loan refinancing agreement
If you’re approved for a loan, the lender will send you a final loan agreement laying out the terms of refinancing. This loan agreement will include your cosigner and outline their liability for the new student loan. Both you and the cosigner will need to sign and agree to the terms of the contract.
Either party can back out of the loan at any time before the primary borrower signs off on the final loan terms.
7. Repay the refinanced student loans with a cosigner
The first payment due date and monthly payment amounts will be outlined in the loan agreement. Once you and your cosigner have signed on the dotted line, you will begin making payments each month.
It’s important to remember that your cosigner is not just there for moral support; they are legally responsible for repaying your loan should you default.
In some cases, you and your cosigner may choose to make repayment a joint effort. Make sure you both understand your agreed-upon repayment plan and schedule. This way, you can avoid someone accidentally missing a payment.
What lenders require when refinancing student loans with a cosigner
The specifics for refinancing student loans with a cosigner depend on the particular lender. Some lenders allow you to apply for student loan refinancing with a cosigner from the get-go. Others allow you to re-apply for a loan with a cosigner only after an initial rejection.
There are several underwriting factors lenders consider. Applying for student loan refinancing is often the only way to find out if you qualify on your own or need a cosigner.
Some refinancing companies, such as Earnest and CommonBond, first process your refinancing application without a cosigner. If you don’t qualify on your own, these lenders assess your eligibility with a cosigner. Rather than reject your application outright, they might invite you to find a cosigner and re-apply.
Other companies, such as PenFed and Citizens Bank, allow you to apply with a cosigner from the start. This can be helpful if you’re unsure you’ll qualify. Citizens Bank does not require a cosigner but does advise borrowers with little or no credit history to consider applying with a cosigner. Similarly, Laurel Road states that borrowers with incomes below $50,000 likely need a cosigner to qualify.
Some lenders also consider the higher of two credit scores — yours and your cosigner’s — while setting interest rates. This helps you get your best deal on student loan refinancing. Adding a cosigner can also make sense if they’re someone you share finances with, such as a spouse.
What your lender looks for in a cosigner
Not only do you need to find the right lender — you also need a cosigner who is well-qualified and willing to sign with you.
To increase your chances of being approved for student loan refinancing and qualifying for your favorable terms, your cosigner should meet the following standards:
1. Good credit
The most common reason a primary borrower might turn to a cosigner is bad credit or insufficient credit history. Different lenders have different credit requirements for their primary borrowers and cosigners. However, you can assume that a cosigner with a credit score of 700 or above may offer you the best chance of landing the loan. They’ll also most likely qualify for more attractive rates.
2. Sufficient income
Many primary borrowers looking to refinance student loans are not yet established in their careers, which means their income might be too low or unreliable to qualify on their own. Lenders want to see that a cosigner has sufficient, steady income to pay off the loan if the primary borrower cannot make the monthly payments.
Your bank will ask for both of your pay stubs, among other documents, to determine your income and debt-to-income (DT) ratio. If your cosigner makes a good living but already owes a great deal compared to their income, they might not qualify for the loan.
Your lender will calculate the DTI ratio, including the payment of the loan you are applying for. Even if your cosigner does not intend to make payments, the cosigned loan might push your cosigner’s ratio above the lender’s preferred DTI ratio.
3. Work and home stability
Lenders often want to see that cosigners have stable work and residence history. That means a cosigner who earns a high income but has frequently switched jobs might not be approved since his work history may appear unstable.
Similarly, a cosigner who has lived in the same residence for five or more years will be looked at much more favorably than a cosigner who moves every two years. This stability is another reason why a cosigner can help a young primary borrower. Young adults just out college haven’t had the time to build up a stable work or residence history.
Understand the risks for your cosigner
If you have a family member, spouse or parent cosigning a student loan with you, it may seem like the perfect solution to overwhelming student loan payments. However, there are potential problems that fall disproportionately on the cosigner.
That’s because cosigners share full responsibility for the loan with the primary borrower. Their liability for the loan can affect their own credit, for better or worse. It’s possible it could keep them from qualifying for other credit since the cosigned loan appears on their credit report.
Furthermore, if the primary borrower does not make consistent payments on the loan, the late or defaulted payments will negatively impact the cosigner’s credit score.
Releasing a cosigner after refinancing student loans
Considering the risks a cosigner takes on, some student loan refinancing companies have options in place to allow primary borrowers to eventually release their cosigners.
While a lender like Earnest might allow the primary borrower to discharge their cosigner after a period of on-time payments, many other lenders require cosigners to remain jointly responsible with the primary borrower for the life of the loan.
It’s also important to note that even the banks that do allow discharging of the cosigner still require the primary borrower to initiate the process.
How to decide if a cosigner is right for you
This situation comes with the potential to damage both your own and your cosigner’s financial standings and the relationship. As the primary borrower, you need to consider carefully before asking someone to cosign student loan refinancing.
In particular, make sure you have satisfactory answers to the following questions:
- Why do you need a cosigner? Do you need a cosigner because your credit score and money management skills are less than robust? That might be a warning sign that taking on a cosigner is a bad idea. It might be worthwhile to spend several months in building credit so you can instead refinance on your own.
- How could this cosigned loan affect your relationship? Money issues have a way of souring relationships, and you will have to deal with uncomfortable relationship dynamics as well as financial stress if you have trouble making payments after someone has cosigned for you.
- What happens if either you or your cosigner passes away before paying off the loan? Generally, cosigners on private student loans and privately refinanced student loans are legally responsible for the debt if the primary borrower dies. And if your student loan cosigner dies, your debt might automatically enter default. Make sure you and your cosigner are completely clear on what to expect should the worst happen.
- Are you comfortable communicating with your cosigner? If the person you have chosen as your cosigner is not someone you’d feel comfortable sharing personal financial details with, you might want to rethink asking them to cosign your loan.
- Do you need a cosigner for student loan refinancing? The incredible rates that lenders offer for student loan refinancing may only be available to some primary borrowers if they take on a well-qualified cosigner. However, borrowers need to recognize that asking a friend or family member to be a cosigner is a major commitment, and it does not necessarily guarantee your best loan rates.
Use these questions to guide you through the decision of whether or not to refinance with a cosigner. Have open and honest discussions about the process of cosigning before you refinance your student debt.
Make sure you and your cosigner enter into a loan with your eyes open and commit to honest communication with each other throughout repayment. While there are benefits to having a cosigner, it’s crucial for both yours and your cosigner’s financial health and relationship to be aware of the downsides as well.
Elyssa Kirkham and Christina Majaski contributed to this report.
Interested in refinancing student loans?
Here are the top 9 lenders of 2021!| Lender | Variable APR | Eligible Degrees | |
|---|---|---|---|
 | 1.89% – 6.15%1 | Undergrad & Graduate | |
 | 1.99% – 5.64%2 | Undergrad & Graduate | |
 | 3.80% – 9.36%3 | Undergrad & Graduate | |
 | 1.91% – 5.25%4 | Undergrad & Graduate | |
 | 2.25% – 6.53%5 | Undergrad & Graduate | |
 | 2.15% – 4.42%6 | Undergrad & Graduate | |
 | 1.89% – 5.90%7 | Undergrad & Graduate | |
 | 2.39% – 6.01% | Undergrad & Graduate | |
 | 2.00% – 5.63%8 | Undergrad & Graduate | |
| Check out the testimonials and our in-depth reviews! 1 Important Disclosures for Splash Financial. Splash Financial DisclosuresTerms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice. To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit. Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of May 1, 2021. 2 Important Disclosures for Earnest. Earnest DisclosuresTo qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application. Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility. Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance. The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product. © 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America. 3 Important Disclosures for CommonBond. CommonBond DisclosuresOffered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation. 4 Important Disclosures for LendKey. LendKey DisclosuresRefinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution. Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810. As of 02/17/2021 student loan refinancing rates range from 1.91% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay. 5 Important Disclosures for SoFi. SoFi Disclosures
6 Important Disclosures for PenFed. PenFed DisclosuresAnnual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.89%-4.78% APR and Variable Rates range from 2.15%-4.42% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change. 7 Important Disclosures for Laurel Road. Laurel Road DisclosuresAll credit products are subject to credit approval. Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com. As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount. Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate. Interest Rate: A simple annual rate that is applied to an unpaid balance. Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%. KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. This information is current as of April 29, 2021. Information and rates are subject to change without notice. 8 Important Disclosures for Nelnet. Nelnet DisclosuresCredit Score Checking your rate results in a soft credit pull, which will not affect your credit score. If you continue with your application, Nelnet Bank will request your permission to obtain your full credit report from one or more consumer reporting agencies. This is a hard credit pull and may affect your credit score. Auto Debit Interest rate reduction of .25% for automatically withdrawn payments from any designated bank account (“auto debit discount”). Auto debit discount applies when full payments (including both principal and interest) are automatically drafted from a bank account. The auto debit discount will continue to apply during periods of approved forbearance or deferment if the auto debit discount was in effect at the time of receiving the forbearance or deferment. Auto debit discount will remain on the account unless (1) the automatic deduction of payments is canceled or (2) there are three consecutive automatic deductions returned for insufficient funds at any time during the term of the loan. Cosigner Release Request for the cosigner to be released can be made by the borrower after 24 consecutive, on-time payments (not later than 15 days after the due date) of principal and interest have been made. Borrowers in deferment or forbearance must make 24 consecutive, on-time payments after re-entering repayment to qualify for the release. The borrower must be current on their payments at the time of the cosigner release request and show the ability to assume full responsibility of the loan(s) by meeting certain credit criteria on their own at the time of the request, including, but not limited to, being a U.S. citizen or having permanent residency in the United States, being the age of majority in their permanent state of residency, providing sufficient proof of income, and having no student loans in default. Hardship Protection Hardship forbearance allows you to temporarily suspend payments on your loan(s) while you are experiencing financial hardship. It is offered in increments of two or three months, with a maximum of 12 months available, in aggregate, over the life of the loan. If your loan(s) are in good standing at the time of your request, you will be eligible for forbearance in increments of two monthly payments. If, at the time of your initial request, your loan(s) are considered past-due, you will be eligible for forbearance in increments of three monthly payments. Future increments of forbearance, up to a life-time maximum of 12 months, may be requested upon the completion of making a certain number of principal and interest payments. During the two- or three-month forbearance period, you will not be required to make payments; however, any unpaid interest will continue to accrue and will be capitalized (added) onto your principal balance at the end of the forbearance period. You may continue making payments in any amount without penalty during the forbearance period. Your loan repayment term will be extended by the number of months in the forbearance period. Loan Eligibility Refinance Loan Eligibility: You must be a U.S. citizen or permanent resident alien with a valid U.S. Social Security number, and be the legal age to enter into binding contracts in your permanent state/territory of residency, or be at least 17 years of age and apply with a cosigner who is at least the age of majority in their state/territory. Non-residents can apply with an eligible cosigner who is a U.S. citizen or permanent resident alien with a valid U.S. Social Security number. The student loans you refinance must be in their grace or repayment period, and you can no longer be enrolled in school on a half-time or more basis. You must have at least $5,000 in student loans to refinance. You, or your eligible cosigner, must have an annual income of at least $36,000. Approval subject to credit review. Other credit criteria may apply. Refinance Loan Limits:
Loan Refinancing Risks: Federal student loans include benefits that may not be offered with private student loans. Carefully review any potential benefits that may be lost by refinancing federal and private education loans, such as the loss of any remaining grace periods. To learn more about what to take into consideration when refinancing federal student loans with private education loans, click here Interest Rates Selecting ‘Get Started’ results in a soft credit pull, which will not affect your credit score. If you continue with your application, Nelnet Bank will request your permission to obtain your full credit report from one or more consumer reporting agencies. This is a hard credit pull and may affect your credit score. Refinance Loan Fixed interest rates range from 2.99% APR (with auto debit discount) to 6.25% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. The fixed interest rate will remain the same for the life of the loan. Variable interest rates range from 2.00% APR (with auto debit discount) to 5.63% APR (without auto debit discount). Your interest rate will depend on your (and if applicable, your cosigner’s) credit qualifications. Variable rates may increase after consummation. The variable interest rate is equal to the One-Month London Interbank Offered Rate (“One-Month LIBOR”) plus a margin. The One-Month LIBOR in effect for each monthly period (from the first day of the month through and including the last day of the same month) will be the highest One-Month LIBOR published in The Wall Street Journal “Money Rates” table on the twenty-fifth (25th) day (or if such day is not a business day, the next business day thereafter) of the month immediately preceding such calendar month. The Annual Percentage Rate (APR) for a variable interest rate loan will change monthly on the first day of each month if the One-Month LIBOR index changes. This may result in higher monthly payments. The current One-Month LIBOR index is 0.15% as of 5/4/2021. The lowest interest rate for each loan type requires automatically withdrawn (“auto debit”) payments, a five-year repayment term, and the borrower making immediate principal and interest payments. Not all borrowers will receive the lowest rate. The interest rate and Annual Percentage Rate (APR) may be higher depending upon (1) the credit history of the borrower and, if applicable, the cosigner, (2) the repayment option and loan term selected, (3) the loan type selected, and (4) the highest level of education attained. If approved, applicants will be notified of the rate qualified for within the stated range. *Checking your rate results in a soft credit pull, which will not affect your credit score. If you continue with your application, Nelnet Bank will request your permission to obtain your full credit report from one or more consumer reporting agencies. This is a hard credit pull and may affect your credit score. **Your actual savings may vary based on interest rates, outstanding balances, remaining repayment terms, and other factors. | |||
