Cosigners and Cosigner Release - What You Need to Know

Cosigners and Cosigner Release – What You Need to Know

December 27, 2018

As more millennials are stepping into experienced job roles and making more money than we were a few years ago, cosigner release is becoming a popular topic. You may have seen a letter in the mail from your student loan servicer or heard from others that they were able to release a parent or relative from cosigner duties. But what does this mean?

What are the responsibilities of a cosigner?

A common misconception about cosigning a loan is that you’ll be the sole responsible party for the loan. Being a cosigner means that you and the student taking out the student loan are jointly responsible for paying the balance of the loan. In the event that the borrower is not able to pay, the cosigner becomes the focus of repayment efforts by the loan holder or servicer. If the borrower is unable to make payments because of a disability, the loans might be forgiven. There are some special cases like this where the cosigner won’t have to pay, but in general, being a cosigner is a long-term commitment that can’t be eliminated except through payoff, release, or extenuating circumstances.

How does cosigning affect credit?

Before asking a friend or family member to take on the responsibilities of a cosigner it’s important to understand how that will affect their credit. Since a cosigner and borrower share the responsibility of a loan, it appears on both of their credit reports. If loan payments are made on time and the borrower is in good standing, then the cosigner will also benefit from the good credit. If the loan has late payments or does into delinquency, this will negatively affect the cosigner’s credit. In addition to affecting the credit score of the cosigner, they may become limited as to the amount of credit available to them. Before asking someone to be a cosigner verify they are not looking to have any large amounts of credit like a mortgage, credit card, or car loan.

When do I not need a cosigner?

Students do not need cosigners to qualify for Federal loans like a Stafford or Direct Loan, but it can improve the chances of being approved. It’s very common for students who apply for private loans to add a cosigner to get the amount that they need and a typically qualify for a much better rate than they could get on their own.

What is cosigner release?

Cosigner release is when the person who cosigned on a loan for you is taken off of the agreement and no longer considered partially responsible for the loan. This makes the borrower solely responsible for the remaining amount of the loan. Some student loan refinancing lenders don’t offer cosigner release.

When student loans are granted, they are provided based on your cosigner’s credit and the borrower’s credit. In traditional cosigner releases the terms of the loan would remain the same as when the borrower took out the loan with the cosigner on it. The only difference with the cosigner release is the cosigner is being removed. When they allow you to release your cosigner depends on the company, if it is offered at all.

Most companies that offer cosigner release allow you to do so, once you’ve made two consecutive years of payments on time. Others may have longer terms for on-time payments before they allow you to apply for release. If you haven’t been making the full payment, that might eliminate your eligibility to release your cosigner. The release also has to be initiated by the borrower and can’t be requested through the servicer by the cosigner.

Not all companies offer cosigner releases. As we mentioned earlier some since loans are originated to include that cosigner, just removing them can be tough. That’s why many companies don’t offer cosigner releases but don’t stress. If you choose to refinance a loan with a cosigner but then decide You’d like to remove that cosigner, there are other options available to you.

Will refinancing my student loan release my cosigner?

People often ask, “What if I just refinance my loan without the cosigner on it. Is it the same as a cosigner release?” Refinancing student loans is not the same thing as getting a cosigner release. Before we go into greater detail it’s important to understand that very few loans are refinanced with a cosigner.

If you are in a position to refinance and qualify, then you don’t need a cosigner to make the new loan possible. There are some exceptions, but during refinancing, you’d be able to check with the servicer to see what terms you could get on your own and then go from there. Most companies that refinance student loan debt will allow you to add a cosigner if you do not qualify on your own, but the cosigner will need to submit some information. If you choose to set up a new refinanced loan without the cosigner, it releases them from the obligation of the former loan.

You may be asking “Is there another way that a cosigner can be removed from a loan without utilizing a cosigner release?” well the answer is yes. Aside from utilizing a cosigner release or refinancing the loan without the cosigner, the borrower or cosigner can pay off the debt. Once the debt is paid off both parties are no longer responsible for the debt.

Before you ask someone to cosign on a loan, consider these things and be sure that they are okay with the responsibility. Make sure that you as a borrower have an understanding and a plan for paying back that debt. If you don’t think that you can pay back the debt or are uncertain of how you will pay off the debt you should not involve a cosigner.

Most students ask their parents to cosign, but frequently have another relative help them by cosigning to get a loan. Know that cosigner release might be possible later, but don’t count on it, and check with the financial institution that holds your loans about cosigner release. You might be able to let mom or dad off the hook by refinancing or paying the debt down in full.

Click For the Difference Between Parent PLUS Loans & Cosigning Education Loans

Set Up Loan Payments

Once you are done with school, you should start paying on student loans. Residency can take several years to complete. It’s likely that your residency isn’t paying you what a full-time position in your career will so all the medical school debt that’s accumulated, can be difficult to sort through. If you find yourself with a large amount of federal student loan debt, look into income-based repayment plans. We would recommend this as a temporary solution until you’ve completed your residency program. This will assure that you’re making student loan payments towards your medical school debt, but that those payments are not impossible to complete. You may eventually qualify for public loan forgiveness on your federal student loans. If you qualify to get on an IBR plan in residency after completing the program you may only have a few years remaining. If you also have private student loans there is no need to worry. Most private student loan lenders will work with you to offer some type of payment plan. You may want to consider refinancing your medical student loan debt. In order to qualify for student loan refinancing, you may need to add a cosigner due to income you’ll be making in your residency. Regardless of which route you chose, in the first few months after graduation, you’ll want to have your payment plan set up. Don’t let this task fall off your radar—in-school deferment ends shortly after graduation for most kinds of medical school debt.

How to Reduce Medical School Debt

Make a Budget

The average income for first-year medical residents is about $55,000, according to a recent report. That money may not go very far with your loan payments and other living expenses. It’s crucial to set your budget and stick to it. Many medical professionals suggest living with roommates, carpooling, using public transit, and setting a budget to keep other spending at a minimum.

Look Into Your Benefits

If you’re starting off pretty frugal until you get accustomed to your new budget, that doesn’t mean you shouldn’t think about saving for the future. When it comes to saving for retirement, the sooner the better. Employer matches and retirement programs should be on your list of things to do early in your residency. Take advantage of match money for retirement if your employer offers it. Match money from your employer is free money! Don’t miss out on that opportunity, and check out the rest of your benefits while you’re at it. There are usually several perks and programs you can look into that might help make your transition to residency more comfortable.

Set Up Housing

Speaking of housing arrangements, there is conflicting advice on whether or not it makes sense to buy a home vs. renting while in residency. Since most residents spend long hours working and don’t have time for household maintenance or upkeep, buying a home can be a difficult choice. Plus knowing that you might not choose to live in the same place long term cause many experts to advise renting. Look at your unique situation and make sure you’re weighing all of these factors when you decide what to do for housing. As far as finding somewhere to live, location will probably be top of your list. After working long hours and several days in a row, having a long commute is the last thing you want. If the area near your work is not cost-effective, look for ways to get connected with a good roommate or two. Research the area before you relocate and stick to your budget for housing costs so that you don’t end up being rent-poor or house-poor.

Practice Self-Care and Routine

Residency can be engrossing. You’re so involved in your work role and in living the life of a busy resident, that it’s not uncommon to let self-care fall by the wayside. Remember, you can’t care for others if you haven’t cared for yourself. Make sure you’re doing what you can to stick to healthy habits, even if there are days you’re low on sleep or not making the best food choices. Getting rest on your time off, enjoying your hobbies even in small doses, and exercising or meal planning can help make sure you’re cared for even with a busy schedule. Enjoy your new life adventure!

Ways to Save on Student Loan Debt During Residency

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2019-03-08

Student Loan Refinancing: How To Avoid Predatory Lending

No one wants to get scammed, but it can be hard to feel confident about whether you’re working with a reputable source or not. In an era when we have access to so many different options and there are countless financial entities available at our fingertips, there are definitely some things to keep in mind so that you don’t end up getting a raw deal. It’s not uncommon if you’re interested in student loan refinancing, or have been approached by a company to want to see if they’re legit before you move forward. Here are some tips on how to avoid being a victim of predatory lending.

Check your sources.

It’s not uncommon to find random financing offers around the internet. Maybe you read about it on Reddit, saw a social media post, or even direct mail. Companies regularly send postcards and mailers to try to get your attention. The marketing material can look pretty convincing, too! Don’t let a slick landing page or a nice mailer fool you. You generally want to find suggestions from sources you trust, like a financial expert, or trusted online sources. A good resource would be the Better Business Bureau. You can see online complaints, information about the company, and all provided by an unbiased source. A second site that provides unbiased online reviews is Trustpilot. Websites with unbiased reviews and legitimate accreditation or backing can be an ideal source to verify credibility.

Never trust dishonest marketing.

It may sound extreme, but we’ve heard of examples where someone was approached by an entity that attempted to look like the government. These scare tactics are used frequently enough by scammy companies for one reason - they work. These companies use this scare tactic because when you think the government is trying to get in touch and you’re in trouble, you answer! These options work similarly to the IRS scams that are always happening with the IRS calling your phone, but in reality, the IRS doesn’t actually call anyone. If the company tried to look like a government program and later you find out they’re not, drop them. A legitimate company won’t send fake notices or use a misleading URL in order to get your business.

Listen to the old adage.

If it’s too good to be true, it probably is. There’s a reason that this simple advice is so often passed down. Really amazing offers are rare. If something sounds like there’s no way they could offer you such incredible terms or that great of a deal, there is likely fine print that’s missing. Fact check the offer and look for comparable data. Your alarm bells should go off if you’re looking at a company whose reputation is dubious. This especially proves true if they’re claiming to get you unheard of service or savings.

Requirements to Refinance Student Loans

What do I owe you?

There are lots of scams across all kinds of industries. One of the most common is when a person tries to get you to pay something up front with the promise of services to come. Lending is no different. If you have to pay a fee or anything before you can see the offer, chances are that this is a scam. Companies often will offer to facilitate student loan discharge for someone with a permanent disability. The process of applying for student loan discharge if you have a qualifying disability is free. Any company offering to do it for a hefty up-front fee is scamming you!

Avoid anyone who is too aggressive.

Sometimes a company will aggressively pursue potential borrowers and push them to select a consolidation option that’s not in the borrower’s best financial interest. They might be a legitimate company but will leave out crucial details in order to sign you up. A good general rule of thumb is to be aware of the interest rate and terms. Understand how a lower payment can extend the life of your loans, thus increasing the overall amount due. Always get all the details, so you know the financial implications of your decision.

Give it a gut check.

Sometimes your intuition is your best tool. If something doesn’t feel right, don’t be afraid to hit pause until you can find more information. Be wary of any company that’s asking for too much personal information before you are sure that they’re legit. Keep an eye out for things that just don’t seem right, like misspellings or a digital presence that seems fishy. You should never be faulted or made to feel bad for giving yourself time to look into the details and read everything over. If you feel like you’re being hurried through or your questions aren’t being answered stop and take a breather to do a gut check. All of your concerns should be addressed with ample information so that you feel confident about the process and decision. If that’s not what you’re experiencing, you should back away.

Use your village.

There are lots of reputable companies out there, and it’s pretty easy to find them by reading unbiased reviews. Do your research and continue learning more about how their process will help you. Use resources available to you to vet companies before you reach out. If you utilize the resources available to you, you’ll be less likely to encounter an unreputable company on the prowl.

You should never be badgered or threatened.

No reputable company is going to make threats against you or repeatedly harass you to sign up. As a consumer, you have certain protections and any company that violates these should be investigated. If you’re facing this treatment from any lender, would like to see more information on various types of financial products and your rights, visit the FDIC website.

Check Out Our Guide to Student Loan Refinancing

Women looking at jobs on computer with dog.

2019-02-26

Reduce Student Loans for College with These Jobs for Students

It’s not practical to go to college and not have a job. With a number of non-traditional students commuting or even raising a family during school years, being employed is a must. Plus, even having a part-time job not related to your desired field can still prove that you have the skills it takes to manage your time, work as part of a team, and be reliable. Never underestimate the importance of these types of skills on your resume! With most students taking out student loans or aid, finding a college job can mean that you can reduce your student loans for college and pay some tuition or expenses with your current income. That said, there are some jobs for college students that are better than others. Here’s our take on what are the top jobs for college students and why.

Nanny

Nannying is a serious skill that not everyone has. If you’re great with kids and can find a gig to match your availability, being a nanny means you’ll get paid well to spend your time helping a family raise cool kids into stellar adults. No longer the $3/hour that you got paid to watch neighborhood kids back in the day, the average nanny rate is $12–$13/hour. You could even get paid more if you have additional skills like foreign languages or child development knowledge. Nanny jobs can be a really great asset to students studying to be teachers. Nannying could be a great introduction to what you’ll be studying in school.

Office Admin

Working in an office is usually not very glamorous, but there’s a reason why so many college students look for basic administrative work. Office environments can be nuanced and require you to learn certain types of etiquette on top of professional dress and demeanor. By working part-time in an office around your school schedule, you’ll learn things like phone skills, how to operate standard office equipment, basic computer skills (that you might already have, but it’s still nice to reinforce), and you’ll make connections with other professionals who can give you a reference later. Depending on the type of office you’re working in you may have the ability to gain some additional career skills. If your regular tasks are completed it’s likely you’ll get to learn some additional skills that could come in extra useful in the long-run.

Hospitality or Community Outreach

Anything in outreach or hospitality that exposes you to lots of people in your community is a great opportunity for a college student. Being the happy face of an organization means that you will build great people skills like patience and customer service. In addition, it’ll give you a chance to get to know other people or places you encounter. Did we mention networking? Do you best to network with as many people as possible. You never know when the relationships you’ve made will come in useful across your career and study journey.

Health Unit Clerk

Helping out in a medical facility or institution is a top job for college students because you can usually land a good rate of pay during hours that fall outside when your classes are. Whether it’s nights, weekends, or after-hours, being an orderly requires you to use empathy and care for people who need help caring for themselves. It’s not for everyone, but if you’re passionate about helping people and want the simplicity of wearing scrubs every day while making about $12/hour, this might be your best bet. Of course, being a health unit clerk is a great first step for anyone looking to further their career in social work or a medical field.

Bank Teller

Some people actually joke that you should not become a bank teller in college because working at a bank can become so comfortable that you won’t want to leave! With opportunities for advancement, solid pay (about $12/hour), regular hours, and plenty of holidays off, being a bank teller is a pretty good job for a college student. You need to be detailed and good at math along with having the people skills of someone in reception or customer service.

Tutor

Tutoring is probably one of the best ways to earn money while in school if you have enough experience in one area of study and can help lower level students navigate their coursework. Tutoring is highly flexible and not limited to business hours, plus you can usually do it at school or at a library or home, and it has a higher hourly rate than many other jobs. Tutors can easily make $20–$40/hour depending on the area of study, helping you make extra cash in less time and strengthening your own study skills while you’re at it. If you’re looking for ways to reduce your student loans for college, consider one of these top jobs for students so you can pay some of your expenses with your income!