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If you refinance student loans with a cosigner, you could find it easier to qualify and get lower interest rates than applying on your own.
Despite those benefits, it’s important to also carefully consider potential downsides of student loan refinance with cosigner backing. If you were to default on the new loan payment, your cosigner’s credit score would be in jeopardy as well. Plus, some lenders may not allow a cosigner to be released from a loan later, even after you’ve 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? Here’s what you need to know about student loan refinancing with a cosigner:
- Some lenders to refinance student loans with cosigner support
- How to refinance student loans with cosigner support
- When lenders allow refinancing 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 cosigner support
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
1. Find a lender that allows cosigners on student loan refinancing
Not all lenders allow cosigners, so your first step should be to research 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’re willing to be your student loan cosigner, and 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’ll 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 isn’t 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. You can then 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. Some lenders will ask to apply separately or jointly.
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 you and your cosigner. Provide any documentation of income or other financial records that 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’ll begin making payments each month.
It’s important to remember that your cosigner isn’t just there for moral support — they’re legally responsible for repaying your loan if 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.
When lenders allow 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 reapply 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 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 reapply.
Other companies, such as PenFed, allow you to apply with a cosigner from the start, which can be helpful if you’re unsure you’ll qualify. Citizens Bank doesn’t require a cosigner, though it advises borrowers with little or no credit history to consider applying with a cosigner.
Some lenders also consider the higher of the two credit scores — yours and your cosigner’s — when setting interest rates, which helps you get the best deal for you 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 most 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 will probably offer you a better 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 with cosigner options 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 can’t 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 (DTI) 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’re applying for. Even if your cosigner doesn’t intend to make payments, the cosigned loan might push your cosigner’s ratio above the lender’s preferred DTI ratio.
Debt-to-Income (DTI) Calculator
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 their 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 of college likely 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 for 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. As such, their liability for the loan can affect their own credit and DTI, for better or worse. It’s possible it could even keep them from qualifying for other credit since the cosigned loan appears on their credit report.
Furthermore, if the primary borrower doesn’t 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 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 may 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 the financial standings of both you and your cosigner, as well as your 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 building your credit, so you can refinance on your own instead.
- How could this cosigned loan affect your relationship? Money issues have a way of souring relationships, and you’ll 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? Cosigners on private student loans and privately refinanced student loans are typically (but not always) held 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’ve chosen as your cosigner isn’t 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 low, advertised 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 doesn’t necessarily guarantee access to the best loan rates.
Use these questions to guide you through the decision of whether or not to pursue a student loan refinance with cosigner help. 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 everyone’s financial health and relationship to be aware of the downsides as well.
Andrew Pentis, 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 | |
|---|---|---|---|
 | 1.88% – 6.15%1 | Undergrad & Graduate | |
 | 1.88% – 5.64%2 | Undergrad & Graduate | |
 | 2.50% – 6.85%3 | Undergrad & Graduate | |
 | 1.89% – 5.90%4 | Undergrad & Graduate | |
 | 2.25% – 6.39%5 | Undergrad & Graduate | |
 | 1.88% – 5.64%6 | Undergrad & Graduate | |
 | 1.90% – 5.25%7 | Undergrad & Graduate | |
 | 2.39% – 6.01% | Undergrad & Graduate | |
 | 2.13% – 5.25%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 June 1, 2021. 2 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest. Earnest DisclosuresInterest Rate Disclosure Actual rate and available repayment terms will vary based on your income. Fixed rates range from 2.59% APR to 5.79% APR (excludes 0.25% Auto Pay discount). Variable rates range from 1.88% APR to 5.64% APR (excludes 0.25% Auto Pay discount). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 36% (the maximum allowable for these loans). Earnest variable interest rate student loan refinance 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 2.04% and 5.8% to the one month LIBOR. Earnest rate ranges are current as of 6/8/2021, and are subject to change based on market conditions. Auto Pay Discount Disclosure You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. Student Loan Refinancing Loan Cost Examples These examples provide estimates based on payments beginning immediately upon loan disbursement. Variable APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 5.89% APR would result in a total estimated payment amount of $17,042.39. For a variable loan, after your starting rate is set, your rate will then vary with the market. Fixed APR: A $10,000 loan with a 20-year term (240 monthly payments of $72) and a 6.04% APR would result in a total estimated payment amount of $17,249.77. Your actual repayment terms may vary.Terms and Conditions apply. Visit https://www.earnest. com/terms-of-service, e-mail us at [email protected], or call 888-601-2801 for more information on our student loan refinance product. Earnest Loans are made by Earnest Operations LLC or One American Bank, Member FDIC. Earnest Operations LLC, NMLS #1204917. 535 Mission St., Suite 1663, San Francisco, CA 94105. California Financing Law License 6054788. Visit earnest.com/licenses for a full list of licensed states. For California residents (Student Loan Refinance Only): Loans will be arranged or made pursuant to a California Financing Law License. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104. Earnest loans are serviced by Earnest Operations LLC with support from Navient Solutions LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries are not sponsored by or agencies of the United States of America. © 2021 Earnest LLC. All rights reserved. 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 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. 5 Important Disclosures for SoFi. SoFi DisclosuresFixed rates from 2.74% APR to 6.74% APR (with autopay). Variable rates from 2.25% APR to 6.39% APR (with autopay). All variable rates are based on the 1-month LIBOR and may increase after consummation if LIBOR increases; see more at SoFi.com/legal/#1. If approved for a loan your rate will depend on a variety of factors such as your credit profile, your application and your selected loan terms. Your rate will be within the ranges of rates listed above. Lowest rates reserved for the most creditworthy borrowers. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi loans are originated by SoFi Lending Corp. or an affiliate (dba SoFi), a lender licensed by the Department of Financial Protection and Innovation under the California Financing Law, license #6054612; NMLS #1121636 (www.nmlsconsumeraccess.org). Additional terms and conditions apply; see SoFi.com/eligibility for details. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. 6 Important Disclosures for Navient. 7 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 04/07/2021 student loan refinancing rates range from 1.90% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay. 8 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 2.13%-5.25% 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. |
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