Obtain a co-signer on your student loans may allow you to qualify for a lower interest rate than you would have on your own.
But for your co-signer, the loan appears on their credit report as if it was their own, increasing their debt-to-income ratio and potentially making it difficult for them to get credit for themselves. Moreover, they are also responsible for repaying the loans which can cause problems if you are having trouble keeping up with your payments.
Fortunately, it is possible to release your co-signer from his obligations. Here’s what you need to know.
How to remove a co-signer from a student loan
You have two simple options if you are looking to modify your co-signed loans.
- Request a student loan co-signer release
- Refinance your student loans
1. Request a student loan co-signer release
Some private student loan companies offer a co-signer release program, which allows you to keep your loans and remove your co-signer.
Requirements to qualify for co-signer release may vary. But usually you need to make a number of consecutive payments on time and then have your credit history checked. If you meet the lender’s criteria, your co-signer will be removed and you will be able to continue making payments as a single borrower.
The process for requesting the release of the co-signer depends on the lender. Call your lender directly to understand the steps and duration of the process.
Unfortunately, co-signer release programs can be difficult to qualify. According to a 2015 report by Consumer Financial Protection Bureau, 90% of borrowers who requested the release of the co-signer were rejected. That said, if you’ve been working on increasing your income and improving your credit, you may have a good chance of removing your co-signer, relieving them of their obligation and the credit implications of being on your loans.
2. Refinance your student loans
If your lender doesn’t offer a co-signer release program, or if you haven’t met payment terms, consider refinance your student loans instead of. The credit requirements will likely be similar to a co-signer release program because in both cases the lender wants to make sure you can qualify on your own.
If you can qualify for a student loan refinance at a lower rate than what you are currently paying, refinancing often has no downside. You can use Credible to compare student loan refinancing rates from several private lenders immediately without affecting your credit score.
With refinancing, however, you may be able to reap other benefits that you cannot get with a co-signer version. In addition to releasing your co-signer from their obligations, refinancing can also get you a lower interest rate than you are currently paying. This is especially possible if market interest rates have fallen or if your credit and income have improved significantly.
Refinancing can also give you a little more flexibility with your monthly payments. For example, if you can afford a higher monthly payment, you can choose a shorter repayment period and get rid of your debt sooner. Alternatively, if you need a little space in your budget, you can request a longer repayment term, which makes your monthly payments more affordable.
See what your estimated monthly payments would be with a refinance using Credible, which allows you to compare the rates of up to 10 student loan refinancing companies.
However, refinancing is not for everyone. Getting approved on favorable terms can be difficult, especially if it hasn’t been long since you needed a co-signer for the initial loans.
During the process, be sure to compare apples to apples with fixed interest rates and variable interest rates. Although variable rates start off lower, they can increase over time.
If you are considering refinancing your student loans, visit an online marketplace like Credible to compare lenders side by side. Just share some information about yourself and your student loans, and you can see loan offers with a simple credit check.
The bottom line
If you have a co-signer on your student loans, the sooner you can get them off debt, the better. Not only will this make it easier for them in terms of credit and financial obligations, but it can also relieve the stress of the situation.
If you are hoping to remove your co-signer from your loans, consider a co-signer release program or student loan refinance. Both options have their pros and cons, so do your research to determine which path is best for you.
And if you are considering refinancing, be sure to compare student loan refinancing rates before you apply, to make sure you find the best deal for you.