This detailed guide will help you learn how to release your cosigner with a student loan refinance.
When you first took out student loans, you may not have had the credit or income required to get approved on your own.
Robb Granado, Chief Operating Officer for CommonBond, says, “Most people took their original student loan out while they were in school and hadn’t yet demonstrated a track record of employment and on-time payment of obligations.”
As such, you probably needed help from a cosigner to secure the loan. But what if you’re ready to release your cosigner from the loan? What can you do?
“People that have graduated, have a job, and have a track record of making payments can ‘get credit’ for all of those positive things by refinancing into a much better deal,” says Granado.
Not only will refinancing release a cosigner from your student loans, but it can also lower your interest rate and monthly payment.
So how can you refinance your student loans to release a cosigner? Here’s what you need to know.
5 steps to refinance your student loans and release a cosigner
How to release a cosigner with a refinance.
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1. Gather your student loan information
Before refinancing, you’ll need to know how much student debt you have. The easiest way to do find out the amounts and lender names is to check your credit reports at annualcreditreport.com.
When you’re checking your reports for your student loan information, make sure you don’t see any mistakes reported, such as missing a student loan payment that you didn’t.
You can challenge any mistakes online directly from your report. Wait at least 30 days for mistakes to get fixed and then recheck your report.
2. Know your current cosigner release options
3. Make sure you’re eligible to refinance your student loans
Eligibility requirements will vary based on the lender. But some of the common requirements state that you must:
- Be a U.S. citizen or permanent resident.
- Meet the minimum amount of student loan debt (e.g. $5,000-$10,000).
- Have a degree from a qualifying college (Title IV accredited university or graduate program).
- Have a strong monthly cash flow and responsible financial history.
- Provide proof of employment or a job offer that will begin within 90 days.
4. Research lenders
Whether you decide to refinance into a fixed or variable-rate, it’s important that you find the right lender to work with.
Keep these four factors in mind when shopping around:
Low APRs
You can cut down on costs by refinancing with a lender that offers a lower APR than your current one.
Various loan terms
Loan terms will vary from one lender to the next. A short-term loan could result in unaffordable monthly payments.
But if you choose a term that’s too long, it can increase the total cost of the loan. So make sure to find a lender that offers the right loan term for your needs.
Economic hardship options
If you want the option to take a temporary break from payments due to economic hardship, make sure you work with a lender that offers this. “No one anticipates any hardships, but life does happen over the course of repayment and you want to make sure your new lender has your back,” says Granado.
Good reputation
You’ll want to work with a lender that has a good track record. Read reviews from past customers to discover the overall level of satisfaction with any given lender. Many lenders will also publish statistics showing the average monthly and the overall amount their customers save.
5. Submit an application and additional documents
Once you’ve narrowed down your top options, fill out and submit your application to the lender(s).
The lender might require supplemental documentation including proof of income, bank statements, credit reports, and other financial documents to confirm that you’re able to repay the loan without a cosigner.
You’re less likely to be approved to refinance on your own if your cosigner has covered most of the loan payments. So you’ll generally need to make at least 12 months of on-time payments from your account to qualify.
Most lenders will also look at your debt-to-income ratio to see what type of spender you are and whether you honor your financial obligations.
Final thought
Refinancing your student loans comes with many benefits. You can release a cosigner, lock in a lower rate, and reduce your monthly payments to name a few.
But to get the absolute most out of these benefits, you need to find the right lender for your specific situation. And with so many options out there, it’s vital that you do your research before committing to one.
Get personalized student loan refinance offers to find your lowest rate. Doing so won’t hurt your credit score.
And make sure to compare lenders side-by-side to find the right one for you.
