How Can A Cosigner Be Removed From A Student Loan
Depending on the situation, there are a couple of options available.
Getting a cosigner on your student loans can make it possible for you to qualify for a lower interest rate than you would on your own.
But for your cosigner, the loan shows up on their as if its their own, increasing their debt-to-income ratio and potentially making it difficult for them to get credit for themselves. Whats more, theyre equally responsible for paying back the loans, which can cause trouble if youre struggling to keep up with payments.
Fortunately, its possible to release your cosigner from their obligations. Here’s what you need to know.
Getting A Private Student Loan Cosigner Release
The bottom line is, if the lender doesnt want to let you off the hook, it doesnt have to but it doesnt hurt to ask. If the loan you co-signed came from Sallie Mae, a popular provider, theres actually a process for that. However, the primary borrower has to ask for you to be released. You cant do it alone.
This happens through something called a private student loan cosigner release. The co-signer must meet certain requirements for repayment set by the lender. The process starts with the primary borrower filling out a release application. Read about the other steps on the Sallie Mae website.
Can The Cosigner Afford To Repay The Student Loan
Thirty-eight percent of cosigners end up paying some or all of a student loan because the primary borrower does not, according to CreditCards.com. Theres always the potential for late payments or default, regardless of how creditworthy and responsible the borrower may be.
Even a well-intentioned person may suffer a loss of income that prevents them from making repayments.
Assume for whatever reason the primary borrower cant repay their student loan. Would the cosigner be financially able to handle repaying this debt themselves?
If not, they shouldnt cosign.
Its important to look at the worst-case scenario and closely examine ones finances before making this type of commitment. Check whether making the monthly payments is feasible and how much financial strain it would create.
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Can A Cosigner Be Removed From A Student Loan
You can usually remove your cosigner from your college loans once youve reached specified milestones, but those requirements may vary from lender to lender. Before you start to explore how to remove your cosigner, make sure you understand who your lender is and if they offer this option to you.
Fortunately, if you have secured a private student loan with a cosigner for undergraduate or graduate student loans from Ascent, you may be able to remove your cosigner after two years, if certain criteria are met. Well go into this a little more later.
When taking out a student loan with a cosigner, its essential to read the fine print before signing. Whether a lender allows cosigner release could be a factor in your cosigners decision as they weigh the pros and cons of signing a student loan.
Meet The Income And Credit Score Requirements
Lenders also typically require that you meet their credit score and income requirements to qualify for the loan on your own.
Youll likely need to undergo a credit check, as well as submit recent pay stubs or tax returns to show your income.
For example:
This includes having a credit score of at least 540, plus having $24,000 or more in annual income.
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The Key To A Student Loan Cosigner Release
The standard path for a cosigner release is very difficult for most borrowers.
Instead of looking at cosigner removal as an independent process, borrowers should focus on cosigner loan elimination. This workaround most commonly will most likely take the form of a student loan refinance. Refinancing eliminates a cosigned loan, and creates a new loan without cosigner involvement.
Ideally, the original borrower can lower interest rates or monthly payments in the process.
Student loan expert Michael Lux is a licensed attorney and the founder of The Student Loan Sherpa. He has helped borrowers navigate life with student debt since 2013.
Insight from Michael has been featured in US News & World Report, Forbes, The Wall Street Journal, and numerous other online and print publications.
The Hardest Way: Pay The Loan Off In Full
Paying off a loan in full is a challenge for any borrower.
Typically, the suggested route to repayment is to pay off the loan with the highest interest rate first. Once the loan is paid in full, the borrower can move on to the next loan until all loans are paid off. Paying off the highest interest rate loans first is preferred because it reduces lifetime spending on interest and gets the debt paid off as fast as possible.
Having a cosigner with a need for urgent removal may shift this order of priority. From the borrower perspective, it will cost slightly more to pay off the lower interest rate loan first. However, such a sacrifice may be an excellent way to thank a cosigner for helping make college a possibility.
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Graduate From Your Program
If you go through all the trouble of getting a loan and dont even bother to graduate, it is a bad sign to your lender. They have no tangible reason to find you stable enough to make your own repayments.
Graduating also shows employers that you are able to buckle down and handle commitment. It demonstrates that you have given yourself opportunities to make a decent living in the future. Even if you lose your job early on, a degree gives you the ability to pick up and find another job quickly.
How To Release Your Ascent Funding Cosigner
At Ascent, we want to make the cosigner release process as simple as possible. You can apply to release a cosigner after fulfilling a minimum payment history, in addition to meeting the other eligibility criteria to qualify for a loan on your own. With an Ascent loan, your loan servicer is Launch Servicing. To check your eligibility, you can contact Launch Servicing using the information below:
- Phone: 877-354-2629
- Website: LaunchServicing.com
Regardless of who your loan provider is, typically you must make this request directly with your loan servicer or loan holder. DACA recipients and international students may be eligible to release their cosigner too if they meet the requirements. Check with your loan servicer for details of your respective cosigner release provision.
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Why Would I Remove A Cosigner From My Student Loan
Removing a student loan cosigner can result in greater financial independence for you and your cosigner. Not only will you feel empowered with your newfound responsibilities, releasing your cosigner may help open up new possibilities for future loan opportunities, such as car loans and mortgage loans, or even investments.
Taking on the responsibility of your student loans is only the beginning, and making your monthly payments each month may help boost your credit score that can impact your financial wellness for years to come.
Consider Refinancing Your Student Loans
One of the easiest ways to obtain cosigner release is to refinance your student loans.
Student loan refinancing means you take a new loan out, often from a different lender. The new loan will ideally have more favorable repayment terms, which means you could lower your monthly payment and the total interest you pay. You can use the proceeds from the new loan to pay the existing student loan debt, so you would no longer owe the original lender.
Refinancing your student loans that currently have a cosigner can be a very simple and quick way to release the cosigner from any responsibility. However, you need to qualify for a refinance loan in your own name. If you can, youll be the only one who owes the new loan, and the loan account the cosigner shared responsibility for will be paid off.
Many refinance lenders have similar requirements in terms of proof of income and a satisfactory credit history as private loan lenders do. Unless your financial situation has improved since you initially required a cosigner, this option may not work for you.
Youll also want to make sure the new loan actually does offer reasonable terms so you dont make debt payment much more expensive for yourself.
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How To Remove A Cosigner By Refinancing
If you’re interested in refinancing private student loans to remove one or both of your parents as a cosigner, there are some things to keep in mind.
One of the most important things to consider is what your refinancing needs are, said Hill. Specifically, that means knowing how much you can realistically afford to pay and what loan term is sustainable for your budget. “There are different options your lender can speak to you about so be sure to fully share your financial situation,” he said.
If you’re ready to look for refinancing loans, start by checking your credit reports and scores. Most private student loan lenders will check your credit as part of the application process. You can compare your scores against the minimum credit score requirements with different loan servicers or lenders to see how likely you are to qualify.
Next, determine whether it makes sense financially to refinance student loans. A student loan refinancing calculator can help you estimate how much money you might save on interest. It can also help you gauge what your new monthly payments might be.
Finally, check your rates with different lenders before selecting a loan to see how much you might pay, based on your desired loan amount, loan term and credit history. Shopping around is a smart personal finance move when looking for the best loan refinance option. You can visit Credible to compare rates from multiple lenders without affecting your credit.
How To Refinance A Home After Marriage
When you co-sign for a loan, you are telling the lending bank that you assume all liability to make payments on the loan if the person for whom you are co-signing fails to make timely payments. A co-signer with a good credit history can allow a person with less than stellar or limited credit to receive a loan for which he otherwise wouldn’t qualify. If you co-signed for your spouse’s student loan and you are now getting divorced, the lender will not likely remove you as a co-signer on the loan, as you and your good credit are the lender’s security for the loan.
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What To Expect When The Cosigner Is Released
When the cosigner is released, their credit score may go up. Free of their financial obligation to be your backup, they can embark on new financial endeavors.
This freedom is only possible if the installments had been properly repaid until the point of their release. The cosigner could benefit in a variety of ways from release, including:
What If Youre Denied
If youre denied your application to remove the cosigner from your own, or if you dont have the option to take this step, whats next? As mentioned above with certain federal loans, refinancing is another option. Refinancing can have strict requirements as well, though. If you have the option to remove a cosigner on your private student loan but dont quality, its likely you wont qualify for refinancing, either.
But if youre in good financial shape and simply dont have the option to remove the cosigner from your current loan, consider refinancing without a cosigner. This could get you a better interest rate and get your parents or other cosigner off of your student loan!
If you are using a cosigner to get a student loan, be sure that you investigate whether or not that lender permits a cosigner release. And if they do, you should actively pursue the release as soon as you are in a financial position to do so.
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Repayment Of The Debt
The most important thing to note is your financial responsibility. Though the primary borrower should make the established monthly payments on the loan, that doesnt mean they always will. If they dont, its your responsibility to pick up the slack. Depending on how late they are, you also may owe penalties, late fees, additional interest and more.
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Meet The Requirements For On
Most private student loan lenders require you to make all monthly payments on time for a certain amount of time to qualify for cosigner release. Youll need to meet this minimum before you can release your cosigner.
For example, Sallie Mae offers cosigner release after 12 months of on-time, consecutive monthly payments.
Stay on top of your payments:
On-time payments are good for your credit, help you avoid late fees, and keep you on track to successfully pay off your loan.
Learn More: When to Refinance Your Student Loans
Putting Terms In Your Divorce Settlement
As part of the divorce process, each spouse is required to fully divulge all financial matters to her attorney. Your attorney should have language included in any divorce settlement stating that all of your spouse’s student loan debt is her responsibility to pay. This way, if your spouse fails to meet her obligations after the divorce is final, you can take her to court and ask the court to intervene on your behalf.
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How To Remove Your Name From A Co
Thomas J. Brock is a CFA and CPA with more than 20 years of experience in various areas including investing, insurance portfolio management, finance and accounting, personal investment and financial planning advice, and development of educational materials about life insurance and annuities.
If you have decided that co-signing a loan for a loved one wasnt a good idea, youre probably experiencing co-signers’ regret. Removing your name from a co-signed loan won’t be easy. For some debts, it may not even be possible.
Co-signing a loan or credit card basically tells the bank that youre willing to make payments if the other person doesnt. It also means the bank can pursue you for payment even if the other person files bankruptcy or dies before the debt is paid. By co-signing a loan, you assume responsibility for the debt just as if it were yours alone.
As a general rule, lenders wont remove your name from a co-signed debt unless the other person has demonstrated they can handle the loan on their own. You never would have been asked to co-sign if the other borrower had shown this ability from the beginning. If things have changed since then, the lender definitely will want proof.
How Do I Know If Im A Co
If youre unsure whether youve served as someones co-signer in the past, there are a few telltale signs.
Co-signers are required to sign loan documents outlining the terms and conditions of the obligation, says Rich Tambor, chief risk officer at OneMain Financial. You must also sign and receive a copy of the Notice to Co-Signer, which is a notice required to be provided to you by the Federal Trade Commission.
The bottom line? You cant be made into a co-signer without your knowledge and consent.
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What Is A Cosigner Release
Cosigner release is the process of having a cosigner removed from an existing loan, which means the cosigner is no longer responsible for the loan. If a borrower can prove to the lender theyre financially stable on their own, they might qualify for cosigner release.
If youre considering cosigner release, keep in mind that there are benefits for you as the borrower, too. This includes:
- Showing you can financially handle the loan on your own
- Potentially taking financial strain out of the relationship between you and your cosigner
Learn More: How to Refinance Student Loans
Determine If You Can Meet Your Lenders Requirements
When your lender confirms a cosigner release is an option, find out exactly what is required before your cosigner can be released from their obligations. The specific requirements will vary from one lender to another, but some common requirements include:
- Proof the primary borrower has graduated from college: Its usually not possible for a cosigner to be released while the borrower is still in school
- A certain number of on-time monthly payments: Many lenders require borrowers to have made between 12 and 48 full payments, including both principal and interest, before the lender will release a cosigner
- Proof of employment: Borrowers may need to prove that they have a steady job and are earning a certain minimum amount of income
- Good credit: The primary borrower must meet minimum credit requirements, which vary by lender
- Must be a U.S. citizen or permanent resident
If you cant currently meet the requirements your lender has set forth for cosigner release, youll need to take steps to ensure you can fulfill them in the future if you want to help your cosigner be released from the loan someday.
You may need to make more payments, increase your income through a side-hustle, or take steps to improve your credit.
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