When you were considering how to cover the cost of college, you may have worked with a cosigner –whether your parents or someone else close to you – for help when borrowing student loans. Now, after graduation and settling into repayment, you and your cosigner may want to options for the loan in your names.
You may have received a communication from your student loan servicer or heard from others that they were able to release a parent or relative from cosigner duties. But how does a cosigner release work?
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 you solely responsible for the remaining amount of the loan.
In traditional cosigner releases, your student loan terms would remain the same as your existing loan. The only difference is your lender removes your cosigner. Lenders have different time frames for cosigner release, and some don’t offer this option at all. Typically, you can request a cosigner release if you’ve made two consecutive years of payments on time, but again, time frames vary.
Keep in mind that if you haven’t kept up with payments, you may not be eligible for a cosigner release. You must also initiate a cosigner release; your cosigner can’t request this on their own.
Benefits of a Cosigner Release
Cosigning a student loan is a generous, but serious, financial decision. Here are a few reasons to consider a cosigner release:
- When you can pay your loan without help, releasing your cosigner absolves them of cosigning obligations and potential consequences
- If your cosigner wants to take out another loan, for example, on their car or house, removing them from the loan will lower their DTI
- Removing a cosigner protects them if you can’t repay your loan due to injury or death. For more information on this topic, explore why cosigners should take out a life insurance policy.
How to Remove a Cosigner From a Student Loan
When you’re ready to remove your cosigner from your student loan, the most common methods are applying for a cosigner release and refinancing your student loans. To apply for a cosigner release, follow these five steps:
Step 1: Make a Qualifying Number of On-Time Payments
Some lenders may require 12 timely payments before you can release a cosigner, but others may require 24, or even 48. Generally, payments must be consecutive without periods of deferment or forbearance, and fixed or interest-only payments you make during college may not always count.
Step 2: Contact Your Lender About Applying for Cosigner Release
The next step is to contact your lender and start the process. If you need some help finding the right words for your call, research sample cosigner release letters for guidance. You and your cosigner can also download sample letters from the Consumer Financial Protection Bureau (CFPB).
Step 3: Confirm You Meet the Requirements for a Student Loan Cosigner Release
Making on-time payments may not be the only requirement to remove your cosigner. To ensure you’ve checked all the necessary boxes, contact your lender to ask what they require. For example, some lenders may require you to:
- Meet minimum credit score requirements without help from your cosigner
- Provide proof of income to ensure you can cover debt payments
- Provide proof you graduated from college
- Be a U.S. citizen or permanent resident
Step 4: Gather the Necessary Documents to Prove Income and Eligibility
Before you can remove a cosigner, you’ll need to provide documentation that proves you can handle your student loan payments independently. This documentation might include:
- Social Security number
- Proof of graduation
- Proof of income – for instance, a W2, a recent pay stub or a tax return
- Information about other debts, like a lease or car loan statement
Step 5: Submit Your Cosigner Release Application
Once you’ve completed these steps, it’s time to submit your cosigner release application. Send any required documentation to your lender via certified mail or email, and be sure to keep a record of all your communications. This is important in case any issues arise with your application and you need to refer to previous conversations.
In most cases, you’ll hear from your lender within a few weeks. If they don’t get in touch, follow up with them to ensure your application is on track. Many lenders don’t make it easy to access cosigner release information, so be patient and consistent with your follow-ups if your lender isn’t quick to respond.
Student Loan Refinance Cosigner Release
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 meet student loan refinancing eligibility requirements, then you don’t need a cosigner to refinance. That said, most companies that refinance student loan debt will allow you to add a cosigner if you don’t qualify on your own, but the cosigner will need to submit some information. If you choose to set up a new refinanced loan without your original cosigner, it releases them from the obligation of your former loan.
Can I Remove a Cosigner Without a Cosigner Release?
You may be asking, “Is there another way a cosigner can be removed from a loan without utilizing a cosigner release?” The answer is yes. Aside from completing a cosigner release or refinancing the loan without the cosigner, you or your cosigner can pay off the student loan debt. Once the debt is paid off, both parties are no longer responsible for the debt.
If you have further questions about your student loan options, and if cosigner release is a feasible option for you, the team at ELFI may be able to help. Contact us today to learn more!
