Cosigner Release and How It Can Protect You From These Nightmare Scenarios
Most college students need to apply with a cosigner to qualify for a private student loan. But your cosigner doesn’t need to be on the hook for your debt forever — if you know how to remove the cosigner from your student loan. Many private lenders offer cosigner release after a certain period of on-time repayment, though it’s not always easy to get approved for this benefit.
To learn how to remove your cosigner from your student loan and relieve them of responsibility for your student debt, let’s go over the following three topics:
How to remove a cosigner from your student loan via your lender
If you have a cosigner for your private loans, here are three steps to get started with student loan cosigner release:
Step 1: Contact your lender
The first step is to get in touch with your lender and ask about cosigner release. You can call your lender or customize and send one of these sample letters from the Consumer Financial Protection Bureau (CFPB).
One of the letters is for inquiring about the process of cosigner release, while the other is for the cosigner, like a parent, who is looking to be removed from the loan.
You can edit the letters as you wish and send them via email or postal mail to your lender.
Step 2: Gather your paperwork and review requirements
Many lenders have specific requirements for cosigner release. They might require a certain number of consecutive on-time payments, proof of income, proof of graduation or creditworthiness. Make sure you get your paperwork in order, such as pay stubs, cosigner release forms or anything else the lender requests. Be sure to make copies for yourself as well.
Private student loan giant, Sallie Mae, for example, has this list of requirements that borrowers need to meet to pursue cosigner release — including proof of income, a credit review and more.
Step 3: Apply for student loan cosigner release
After contacting your lender and gathering your information, it’s time to apply for cosigner release. Send in your documentation via certified mail or email and keep any communication from your lender. You should hear a response within several weeks — if you don’t, follow up.
It’s key that you follow up, as many lenders don’t make it easy to access this information or don’t advertise cosigner release as an option at all.
Once you complete the process of getting your cosigner released, be sure to keep any documentation related to the process for your records to help you avoid any issues down the line.
Although cosigner release is possible, some borrowers have trouble getting approved for this benefit. In 2015, the CFPB found that 90% of borrowers who applied for cosigner release were rejected.
Hopefully the rates of rejection are lower today, but be prepared to face potentially stringent requirements when you pursue cosigner release.
How to remove a cosigner from your student loan by refinancing
Another option for obtaining cosigner release is to refinance your loans through another bank. In addition to getting a cosigner removed from your loans, you may be able to reduce interest rates and save money on your loan repayment too.
To get approved for refinancing, you’ll need to meet a lender’s criteria for credit and income. If you qualify, you could potentially get a lower interest rate than you have now. What’s more, you’ll also get the opportunity to consolidate multiple loans into and choose new repayment terms.
One downside of refinancing federal loans, though, is that you lose access to federal repayment plans and protections. For more on the ins and outs of this process, check out this guide to student loan refinancing.
Why you might want to consider cosigner release
Now that you know how to remove a cosigner from a student loan, you might be wondering what the benefits are to doing so. Well, a cosigner is as responsible for the loan as you are, meaning they would be expected to pay if you fell behind.
You might want to remove your cosigner so that they’re no longer legally responsible for your debt. Releasing your cosigner could also help improve their debt-to-income (DTI) ratio, since they would no longer have your student loan as an open account on their credit report.
A lower DTI ratio means your cosigner could have more access to credit, such as a mortgage or auto loan. Plus, their credit score won’t be dinged if you miss a payment on your student loans.
Removing your cosigner can also help you both in the event of injury or death. If the primary borrower is unable to pay back their loans for these reasons, the cosigner becomes responsible. Along similar lines, sometimes a private loan will immediately enter default if a cosigner passes away.
Finally, untangling your finances could take tension off your relationship. You’ll no longer have to worry about the implications of sharing debt and the stress that could create between you and your cosigner.
For these reasons, it can be a beneficial move to release your cosigner from your student loan. While approval isn’t guaranteed, pursuing cosigner release is certainly worth a shot if you want to free your cosigner of responsibility for your student debt.