Student Loan Cosigner Release: How to Remove Yourself From Your Child’s Loan

 December 5, 2019
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Student Loan Cosigner Release

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Unlike federal loan servicers, private student loan providers look at an applicant’s credit history and income to determine if they qualify for a loan. Most students don’t have full-time jobs or lengthy credit reports, so getting approved on their own is next to impossible. A cosigner — also called a guarantor or endorser — acts as a backup, stepping in to make payments if the student falls behind.

Although serving as a cosigner for your child’s loans can be a big help to them, it can have serious ramifications on both your finances and future goals. You may be wondering, “Can a cosigner be removed from a student loan?” Once your child is on their feet, getting a student loan cosigner release can help you get your finances back in control.

How to apply for a cosigner release
3 benefits of a cosigner release
Talking with your child about cosigner release
Alternative options to a student loan cosigner release
Finally free of student loans

How to apply for a student loan cosigner release

Unfortunately, getting released as a cosigner isn’t as easy as calling your lender and asking to be removed. In fact, not all lenders offer cosigner releases. Before you get started, make sure a release is something your lender offers.

If a student loan cosigner release is possible, you’ll generally have to meet the following criteria. Here is an example of some requirements to qualify for student loan cosigner release through Sallie Mae:

  • You have made at least 12 on-time payments: To qualify for a student loan cosigner release, you and/or your child need to have made at least 12 payments after graduation and before applying for the release. Payments made while in school or during the grace period do not count.
  • Your child has graduated: To apply for a student loan cosigner release, your child must have proof of their completed degree, such as a copy of a diploma or official transcript.
  • Your child has a sufficient credit score and proof of income: Your child must be able to demonstrate that they make enough money to cover the loan payments, and their credit score must meet the lender’s minimum requirements. They must provide either a current pay stub issued within the last 90 days or their most recent W-2.

If you and your child meet the requirements, you’re ready to complete the application process. Every lender has their own specific process to apply for a cosigner release, and most require the primary borrower (your child, in this case) to initiate the process.

It’s a good idea to call or email the loan servicer directly for instructions, but most lenders require the borrower to complete the following steps:

  1. Complete an application: As the borrower, your child must fill out an application that asks about their income, expenses and any other forms of debt.
  2. Include documentation: When the student mails in the application, the lender requires that they provide their Social Security number, proof of graduation and proof of income, such as a W-2, recent pay stubs or tax returns. Some lenders will also ask for information about other debt, and they will ask the student to submit a copy of their lease or car loan statement.
  3. Submit your application: The borrower must either submit the application online or mail in the completed form and required documentation to the address the lender has listed.

Once the lender receives your child’s application, they will typically look up your child’s credit history and review the documentation. The decision to release you from the loan or not is entirely up to their discretion, and it can take several weeks for them to make a decision.

In the meantime, make sure your child stays current on loan payments so a late student loan payment doesn’t ruin your application.

3 benefits of a cosigner release

Cosigning a loan with your child is a kind and generous decision, but it can have serious financial consequences and could leave you wondering if you can be removed as a cosigner from the student loan. By getting a student loan cosigner release, you can look forward to the following perks:

  • You’ll no longer be responsible for payments. If your child does not make their payments, the lender can’t come after you for the balance due.
  • Your credit won’t be affected. If your child misses payments and enters default, your credit score won’t be damaged.
  • You’ll have a greater ability to get other forms of credit. Because you’re no longer responsible for your child’s debt, lenders will not consider the loan when they review your application for other forms of credit. Without a hefty student loan on your credit report, lenders are more likely to approve you for a mortgage or car loan.

Talking with your child about cosigner release

If you want to be released as a cosigner, it’s a good idea to first discuss with your child what that will mean for them before filling out the application.

For a recent graduate or young professional just getting used to the real world, hearing that they will be on their own when it comes to student loans can be frightening. They might be used to having you as a safety net when they’re short on cash.

To avoid any resentment or misunderstandings, talk about why you’re seeking a student loan cosigner release. Explain to them if the loan is holding you back from buying a car or making it impossible to get a loan to do necessary home repairs. If you can’t afford to make the payments, be honest about that, too.

Once your child understands your rationale, you can emphasize some of the benefits a cosigner release has for them, such as:

  • Greater independence: Without you as a cosigner, your child won’t have to update you on the status of their loans and payments. That change can be freeing and a great relief.
  • Less friction in the family: When your child takes responsibility for the loan, there is less resentment in the family. Because you don’t have to worry about payments anymore, they likely won’t feel hounded or guilty about their financial decisions.

An alternative option to a student loan cosigner release

If a student loan cosigner release isn’t a viable option, you can also consider refinancing the student loan debt. By refinancing your student loan, the cosigner will be off the hook for the old loan and the student can sign the new, refinanced loan under their name alone.

Refinancing student debt allows you to consolidate the existing loan into a new, private loan, ideally with a lower interest rate — indeed, private, refinanced loans can have interest rates as low as 1.81% as of the date of publishing. Keep in mind, though, that you’ll likely need a good credit score and proof of a steady income to qualify for refinancing. It’s also important to note that if you refinance your federal student loans, you will lose federal protections, such as income-driven repayment plans and loan forgiveness options.

Finally free of student loans

Getting approved for a either a federal student loan cosigner release or a private student loan cosigner release can be a huge relief. Without that financial weight on your back, you’re free to focus on your own finances and well-being. Because you no longer have to worry about making monthly loan payments, you can use that money for other goals like saving for retirement or building an emergency fund.

After being released from your child’s private loans, you also can turn to tackling other forms of education debt. If you took out federal Parent PLUS loans, there’s a solution to transfer them into your child’s name, too. While it’s generous to help your child, at a certain point they’ll need to start standing on their own two feet financially, so you can ensure you’re doing the same.

Sage Singleton Evans contributed to this report.

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