For many students, financial aid is often not enough to fully cover the cost of attending college. Additionally, if they are young and do not have a long credit history, these same people may find it difficult to obtain private student loans given their lack of creditworthiness. When that’s the case, their best, and perhaps only option, is to take out a student loan with a cosigner.
If you’re a parent, chances are your kids have had to take out a student loan with you as a cosigner. Allowing your child to “piggyback” on your credit history and score in order to obtain a loan they might not otherwise qualify for is a big risk parents often make. Otherwise, your kids could be facing exceptionally high interest rates with their student loans.
However, once your child has completed their degree and are working full-time, you may be interested in a student loan cosigner release, allowing your name to be removed from the loan. Unfortunately, this is often easier said than done.
Obstacles for student loan cosigner release
Allowing borrowers to remove cosigners increases the risk to the lender. This is because in the event that the borrower passes away, loses their job, or is otherwise unable to pay back their loan, the cosigner is fully responsible for repaying the loan. Keeping cosigners on loans as long as possible is the lender’s way of ensuring repayment.
But don’t fret yet parents! Student loan cosigner release is possible.
2 paths to student loan cosigner release
Typically, there are two main ways to remove cosigners from student loans. Your first option is to go through your existing lender, while your second option is to refinance private student loans that have a cosigner into a new loan. Let’s explore both of these options in-depth.
Student loan cosigner release through your existing lender
If you are happy with your servicer, interest rate, and the terms of your loan, you may be interested in how to remove a cosigner from a student loan while remaining with your existing lender. While this is often the most difficult of the two methods, it may be possible. Here’s a step-by-step guide:
Step 1: Contact your lender and get cosigner lease terms in writing
Obtaining the steps for student loan cosigner release in writing is important because you can follow exactly the terms your lender lays out. If your servicer tries to deny you cosigner release even after you’ve met all the terms, you can prove to your lender that you complied with all of the requirements by presenting the terms in writing.
Although you can always submit a complaint to the CFPB if your lender doesn’t cooperate, being proactive up front can help make sure that isn’t necessary.
If you have private student loans through Sallie Mae, you can see a list of requirements for student cosigner release on their website. Other private lenders may have their requirements listed on their websites, or you may have to contact them directly to obtain such a list.
Step 2: Make sure you meet cosigner release criteria prior to applying
Most lenders will have similar requirements, so if you have a servicer other than Sallie Mae you may still find their list helpful as a starting point while you wait for confirmation from your lender. For example, looking at Sallie Mae’s list you can see that the borrower must have proof of completion of degree or program, proof of income, and a credit check are all requirements.
So if the borrower doesn’t meet the above criteria yet, it may be a good idea to wait before applying for student loan cosigner release — regardless of who the servicer is.
Step 3: Submit your application, keep copies of all relevant documentation
Make sure your application is complete and that you are submitting all documents in your servicer’s preferred format, either by post or electronic submission. If you send it in by post, send by certified mail so there is a record of submission.
Keep printed and electronic copies of all documents, including any correspondence you receive from your servicer. This includes copies of the approval, if granted, to ensure that there isn’t any confusion down the road. And don’t be afraid to follow up with your servicer if they are not responding to your application in a timely manner.
Student loan cosigner release via refinancing
Many lenders make it difficult to remove cosigners from student loans. Applying for student loan refinancing with a new servicer may bypass such obstacles.
Refinancing your student loan through a private company can also yield other benefits, like lowering your interest rate, decreasing the length of your repayment term, or lowering your monthly payments.
Refinancing federal student loans through a private company does mean giving up benefits associated with such loans, though most federal student loans do not require a cosigner. However, if a parent took out PLUS loans on a child’s behalf and would like to refinance them into the child’s name, some student loan refinancing companies offer this service. Check out our four-step guide to the student loan refinancing process for more information.
Although there may be some stress and hassle involved for parents pursuing a student loan cosigner release, it will ultimately improve the financial situation of the parents. Just remind your children it’s all part of #adulting.
Interested in refinancing student loans?Here are the top 6 lenders of 2017!
|Lender||Rates (APR)||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!|
|2.79% - 6.74%||Undergrad & Graduate||Visit SoFi|
|2.79% - 6.74%||Undergrad & Graduate||Visit CommonBond|
|2.67% - 7.26%||Undergrad & Graduate||Visit Lendkey|
|2.99% - 6.99%||Undergrad & Graduate||Visit Laurel Road|
|2.65% - 6.39%||Undergrad & Graduate||Visit Earnest|
|2.78% - 8.24%||Undergrad & Graduate||Visit Citizens|
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