Refinancing with Earnest
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If you’re a parent, chances are you may have cosigned a private student loan with your child. Maybe you wanted to help them pay for college or complete a certification program to get ahead in the job market.
What’s more, a student loan cosigner is quite a common requirement when it comes to private student loans. In fact, according to the Consumer Finance Protection Bureau (CFPB), in 2011 over 90 percent of private student loans were cosigned.
But did you anticipate repaying the student loan you cosigned? Technically, as the cosigner, you agreed to do so if the primary borrower didn’t.
And maybe your child, the primary borrower, has now missed a payment or two. Wondering how much of the student loan you may have to repay yourself? When it comes to private student loans with a cosigner, here’s what you need to know to protect both the primary borrower and yourself.
7 steps a cosigner facing non-payment can take
Generally, as the cosigner, you are equally liable and responsible for repaying the debt you cosigned.
The lender usually won’t turn to you for repayment unless the primary borrower starts missing payments. But if this happens, you will have the same responsibility to pay as if it were your debt. Any missed payments or even default will equally damage both the primary borrower’s and cosigner’s credit.
Here’s how to prevent this from happening — and how to move forward if it does.
1. Understand your student loan terms
First, review the student loan contract that you cosigned upon origination. For private student loans with a cosigner, each lender will have its own rules. The contract outlines details such as:
- When a payment is considered late
- Which events will trigger a private student loan default
- What your rights and responsibilities are as a cosigner
- If the lender offers any options like unemployment relief
If you know what’s in your contract, you will be better prepared to work with your child or primary borrower whenever any issues arise.
2. Check up on your cosigned student loan
If you’re the student loan cosigner, you usually won’t be notified right away if payments are late or overdue.
In fact, a cosigner might not be notified that the student loan is not current until it’s already defaulted and in collections. At this point, however, a lot of damage has been done. You’ll want to work quickly to avoid this issue.
To prevent this from happening, keep an eye on your cosigned account. Also, check in with the primary borrower every month to ensure that they are keeping up with payments.
You may also want to access your credit report from the credit bureau to which the lender reports account activity. You should be able to check the cosigned loan on the credit report to catch any late or missed payments before the account goes into default.
3. Work with your lender ASAP
If the primary borrower is having trouble with their loan costs or has missed a student loan payment, take action right away. Contact the lenders and see what your options are and if they are willing to adjust repayments, even temporarily.
Many lenders have discretionary forbearance or unemployment protection to temporarily pause repayment. This will give the primary borrower and the student loan cosigner a chance to get their finances back on track. You could also ask your lender to lower monthly payments for a while until you can afford to pay more.
Remember, it pays to be proactive. Lenders will be more willing to work with you on repayment if you contact them before the loan misses a payment or becomes delinquent.
4. Split student loan payments
If the lender doesn’t budge, work with your co-borrower to figure out how you can get the student loan current and ensure payments are made on-time.
You might agree to each contribute a portion of the student loan payments. Maybe each pays half, or the primary borrower pays what’s affordable, and the cosigner makes up the difference.
Be clear on who is responsible for sending payments where. Should each person send in their portion of the payment? Or should the primary borrower pay his portion to the student loan cosigner, who in turn sends in the full payment? Make sure you agree together on a repayment arrangement that you both feel is fair and meets your needs.
5. Take over payments temporarily
The student loan cosigner might need to fully take over making payments until the primary borrower can afford to cover these costs again. Again, talk to the borrower and agree on how this will work.
If you take over payments until the primary borrower can resume payments, do you expect to be repaid for your contributions? How long are you willing or able to cover these student loan payments? What do you expect the borrower to be doing to get to the point where she can resume paying off this loan?
Work out the details and set clear expectations for how to manage student loans with a cosigner. If the borrower agrees to repay you, make sure you understand how you’ll recoup your money.
6. Refinance the cosigned loan
A student loan cosigner unwilling to repay this debt should try to remove themselves from the loan before there are ever issues with repayment. They can refinance student loans with a cosigner to be solely in the primary borrower’s name or work on getting a cosigner release.
The other option is for the cosigner to refinance to the student loan into their name. This gives you, the cosigner, full control over the debt, with the ability to choose repayment terms that fit your needs. There’s even a decent chance that refinancing could lower your student loan rates and help you save interest.
If you decide to take this step, refinance right away. Any late or missed payments could ding both the cosigner and primary borrower’s credit scores. This, in turn, will make it harder and more expensive for you to refinance.
7. Hire a student loan lawyer
Unfortunately, some student loans with cosigner will go into default before the cosigner even finds out there is a problem.
In this case, the lender or debt collectors will start pursuing you for repayment or send the debt to collections. And the consequences can be big. The lender or collection agency might try to sue the cosigner, primary borrower, or both for repayment through wage garnishment or liens on assets, according to the CFPB.
If you’re this far into the process, it is probably best to get professional advice. Consulting a student loan lawyer can help you understand your situation and options to find the best way forward.
A student loan lawyer can also help clarify the details of your loan contract, your rights as a cosigner or borrower, and your legal options with a loan.
Treat cosigned student loans like your debt
As a student loan cosigner, you need to view this debt as if it were your own. Track repayment and due dates just as diligently as you would if it were your debt. Because in the eyes of the lender, it is just as much your debt as the primary borrower’s.
Staying aware of potential issues on student loans with a cosigner is crucial to catching issues early and preventing missed payments, delinquency, or default. Make sure you understand your private student loan agreement and your options to move forward.
Interested in refinancing student loans?Here are the top 6 lenders of 2019!
|Lender||Variable APR||Eligible Degrees|
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1 Important Disclosures for SoFi.
2 Important Disclosures for Earnest.
To 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 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.54% APR (with Auto Pay) to 7.27% 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 March 18, 2019, 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 0318/2019. 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 firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 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 Laurel Road.
Laurel Road Disclosures
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the fixed rate will decrease by 0.25%, and will increase back up to the regular fixed interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
4 Important Disclosures for LendKey.
Refinancing 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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). 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 2.5% effective February 10, 2019.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.54% – 7.12%3||Undergrad & Graduate|
|2.54% – 7.27%1||Undergrad & Graduate|
|2.67% – 8.96%4||Undergrad & Graduate|
|3.23% – 6.65%2||Undergrad & Graduate|
|2.69% – 7.43%5||Undergrad & Graduate|
|2.98% – 9.72%6||Undergrad & Graduate|