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- A student loan cosigner release removes a cosigner’s name from your student loan, making you solely responsible for future payments.
- Not all private lenders offer cosigner release options.
- Lenders that do offer this option will usually want you to meet certain requirements before approving your application.
A student loan cosigner release is a process that removes a cosigner’s name from your student loan. If you’ve taken private student loans, chances are you would have needed a cosigner to meet the lender’s requirements. While this helps you qualify for private loans, it potentially poses some amount of risk for the cosigner who shares responsibility of the loan with you.
Releasing the cosigner from the loan, frees them from this responsibility but the process is not always as straightforward as you may like.
Here’s what you should know about getting and releasing a cosigner from student loans.
Why You May Need A Cosigner For Student Loans
Cosigning only applies to private student loans, which require a credit check to get approved. When it comes to federal student loans, all students are eligible, provided they meet certain enrollment criteria.
If you’ve exhausted all your federal financial aid eligibility and need more funds to cover your college expenses, you may consider applying for private student loans. Private student loan approval generally carries certain minimum credit and income requirements. If you don’t meet these requirements on your own, you may need a creditworthy cosigner to get approved.
A creditworthy cosigner is a person who meets the lender’s minimum lending criteria. This could be a parent, sibling, relative or friend. When you apply with a cosigner, lender approval is based on the cosigner’s financial credentials.
Why Might You Need a Cosigner Release?
Cosigning a student loan is a big commitment as it takes on the shared responsibility of the loan with the student. There are a few reasons the borrower or cosigner might want a cosigner release, including:
- The cosigner is being held liable for a debt that can’t be paid.
- Missed payments are hurting the cosigner’s credit score.
- The borrower can handle the payments themselves thanks to an increase in income.
- The cosigner wants to apply for other loans and is unable to due to the student loan.
What are the Benefits of a Cosigner Release?
If the student is able to take on the loan payments, there are a few benefits of a cosigner release, especially for the cosigner.
It Removes the Cosigner’s Obligations
The biggest benefit of a cosigner release is the fact that it removes the cosigner’s obligations to the loan. The student borrower will now be solely responsible for the loan, and the cosigner will no longer be held accountable or liable for any payments. Any missed or late payments made by the student going forward will not reflect on their credit score. If the student borrower is injured or dies, the cosigner also won’t be on the hook for the loan.
It Lowers Their Debt-to-Income Ratio
Whether you’re a cosigner or the main person borrowing the student loan, the loan will show up on your credit report. For those with a higher debt-to-income (DTI) ratio due to these student loans, it can make getting a home mortgage or auto loan more difficult. By opting for a cosigner release, you free up the cosigner’s credit and lower their DTI.
Cosigner Release Requirements
Remember, you had to get a cosigner because you did not meet the lender’s minimum lending requirements? To release your cosigner from this responsibility, you will have to meet the lender’s minimum lending requirements.
Most (but not all) student loan lenders will offer a co-signer release option. Ideally, you would have borrowed from a lender that does offer this facility. Each lender will have slightly different requirements for borrowers and their co-signers to qualify for the release. In general, student loan cosigner release requirements include:
- Consecutive on-time loan payments over a certain period, which may be 12, 24, or 48 months
- Minimum credit score requirement
- A certain minimum monthly income
How To Apply For A Cosigner Release
- Check your loan agreement: Start by going through your loan agreement to review the lender’s cosigner release requirements. Do you meet their minimum criteria in terms of timely payments, credit score, and income? Some lenders may also require you to show proof of graduation.
- Talk to your lender: It’s always a good idea to speak directly to your lender and get clarity about the requirements and the procedure.
- Keep your documents ready: At the very minimum, your lender will likely ask you to submit proof of graduation and pay stubs for a certain number of months. Don’t forget to keep a copy of all documents for yourself.
- Submit a completed cosigner release form: Complete the lender’s cosigner release form and submit it along with the required documents.
After the lender receives your application, they will check your credit to assess your creditworthiness. If you meet all their requirements, they will calculate your personalized interest rate based on your financials and send you a loan agreement made out in your name alone. This whole process could take a couple of weeks. This varies from one lender to another.
What To Do If You Can’t Release Your Cosigner
Under certain circumstances, you may not be able to release your cosigner. This could happen if your lender doesn’t offer this option or if your cosigner requests to be released from their responsibility, but you don’t meet the lender’s requirements. In either case, if you need to release your cosigner but can’t, you may want to consider refinancing your student loans.
Refinancing involves exchanging your existing loan for a new loan with different terms. When you refinance, your cosigner’s name will be removed from the new loan, and it will be made out in your name only. Learn more about student loan refinancing, how it works, and its benefits.
Answer a few questions on College Raptor and get personalized student loan refinance rates that meet your financial goals.
