You want to get your cosigner released from your private student loan but you don’t know how. Where do you actually start? Is this process even possible?
Many available guides online provide various information on how to remove a cosigner from your student loan. However, not a lot of these sources explain what you need to do step by step to jumpstart the process.
This article will give you an easy-to-follow guide on how to get a cosigner off your student loan. It will also provide you with alternatives on what you can do in case your lender does not agree on having your cosigner released from the loan.
Step 1: Ask Your Lender If A Cosigner Release Option Is Available
There are many different reasons why you want to remove your cosigner from your student loan contract. Maybe you want to release them from the responsibility or maybe you now have a difficult relationship with them.
On the practical side, perhaps your cosigner wants to make a big purchase and needs to improve their debt to credit ratio. By being released as a cosigner from your student loan, your cosigner’s credit score could improve.
Whatever your reason may be, you can follow these steps to start the process.
So what do you need to do first?
The first step that you need to do is to call up your lender and check whether your private student loan has a “cosigner release” option.
Many student loan providers still do not allow borrowers to remove their cosigners from student loans, but there are also many loan companies that already have this option.
If your lender is offering a cosigner release option, this means you can remove a cosigner from your private student loan contract and release them from any responsibility pertaining to the loan.
Depending on the lender, there will be different requirements that you would need to meet. In the succeeding steps, we will give you a guide on what private student loan lenders generally require for you to complete the cosigner release process.
But what if your lender does not have a cosigner release option? If this is the case, you can jump to our suggested alternatives to obtaining a student loan cosigner release.
Step 2: Make The Required Number Of Consecutive Payments To Qualify
Loan companies will not release a cosigner just because you want them to do so. The reason why lenders require cosigners is that they act as a guarantee in case you will not be able to pay back the loan.
With student loans, students are seen as a bigger risk because most of them do not have any credit history and no stable job at the time of application. That’s why getting a student loan without a cosigner is often tough.
When you graduate from college, you may want to release your cosigner from the responsibility of being the guarantor for the loan. If the cosigner release option is being offered by your lender, one of the most common requirements is that you have to complete the required number of payments for a given period.
For example, if you have student loans with Sallie Mae, you must first complete 12 consecutive and on-time monthly payments before you can be offered a cosigner release.
With other lenders, the period that a cosigner has to be on a student loan before a release is offered is longer. It can be 24 months, 36 months, or 48 months.
If you have been making your student loan payments with no issues, then applying for a cosigner release will be much easier.
But what if you’ve just started making monthly payments now that you have a regular job?
If you are in a hurry and you don’t want to wait for the 12 to 48 months required by the lender, you may also skip this step by pre-paying an amount equal to the required total payments.
Check with your lender if they offer this option (Sallie Mae offers this option). The only challenge with this shortcut is coming up with that huge amount in advance.
Step 3: Be Ready To Show Proof Of Income
Another important requirement when you apply for cosigner release is to show proof of income. Your lender will not approve to have your cosigner released from the student loan contract if you cannot prove that you have the ability to make debt payments by yourself.
If you don’t have a regular job or a steady paycheck, it might be more challenging for you to get approved for cosigner release.
Some lenders, on the other hand, may accept other sources of funds including inheritance, Social Security payments, disability award letters, etc.
Step 4: Build Your Credit Score
Your credit score plays a huge role in whether the lender will agree to release your cosigner. The higher your credit score is, the better chances you have in convincing the lender that you can make the payments on your own.
To improve your credit score, you can follow these tips:
Improve Your Credit Utilization Ratio
Your credit utilization ratio is the debt you currently have compared to how much available money you can borrow.
You can improve your credit utilization ratio by not making any new large purchases (mortgage, car loan) and by not maxing out your credit card before you apply for cosigner release.
You should only use 30% to 40% of your credit limit so you can also lessen your credit utilization by paying off some of your debts.
If You Don’t Have A Credit Card, Apply For A Secured Credit Card
With a secured credit card, you’d have to pay a deposit and you will have a low credit limit. Use your credit card (but don’t max it out) and make on-time payments to build your satisfactory payment history.
Monitor Your Credit Report For Errors
A study conducted by the Federal Commission found that one in five Americans have errors on their credit reports. By diligently checking your credit reports for mistakes, you can dispute these errors and can improve your score.
You can request a free copy of your credit report from annualcreditreport.com and follow our guide on how to dispute entries on your credit report.
Step 5: Demonstrate Financial Responsibility
Even if you are committed to making all the student payments by yourself, the lender does not know you personally. So how will they gauge whether you are indeed a worthy borrower who can shoulder the payments without a cosigner?
Lenders will have to look at your credit history as a factor to decide on whether to grant a student loan cosigner release.
Do you have any missed payments on your credit cards? Have you defaulted on a personal loan? Have you applied for federal student loans deferment or forbearance in the past? Or perhaps you’re on the brink of bankruptcy?
If any of these things are visible on your credit report, your chances of getting a cosigner release are low.
Therefore, if you’re planning to have your cosigner off your student loan contract, you have to definitely clean up your act and show that you have recently put your financial matters in order.
Step 6: Prepare The Required Documents
If you’ve ticked all the steps listed above, then the next thing you need to do is to prepare all the documents the lender requires. Ask for a complete list from the very start so you have enough time to secure your paperwork.
Some examples of documents that will be required may include proof that you’re of legal age to enter into a contract on your own, paystubs, tax returns, proof of graduation, proof of U.S. citizenship, etc. These requirements will vary depending on your lender.
Step 7: Fill Out The Student Loan Cosigner Release Form And Submit The Application
Once you have all the required documents, the last step is to fill out the cosigner release application form.
The method of submission will depend on your lender. Some lenders now allow you to submit your application online by uploading digital copies of your cosigner release form with your documents. Some may still require submission through registered mail or Fax.
Once you submit your application, your lender will evaluate your status along with your credit report to make a decision.
Alternatives To Obtaining A Student Loan Cosigner Release
What if your lender does not offer a cosigner release option? Or perhaps you do not meet some of the requirements that your lender is stipulating to qualify for a cosigner release.
Does this mean you cannot remove your cosigner throughout the life of the student loan?
There are alternatives that you can explore to remove a cosigner from your student loan. Depending on your personal situation and how immediate your need is, some of these alternatives could work for you.
1. Student Loan Refinancing
One of the easiest and quickest ways to remove a cosigner from your student loan is to refinance student loans with another lender.
When you refinance, the old loan is paid off and you will start paying what you owe based on the new loan term.
You will have to meet the income and credit requirements set by the new lender to qualify for student loan refinancing.
This option is a great alternative for those who have good to excellent credit and can show that they can shoulder the financial responsibility on their own. It can also be advantageous because there is a possibility to enjoy better interest rates when you refinance your student loan.
For borrowers with poor credit, qualifying for student loan refinancing might not be that easy. While some lenders might still consider your application, you may end up with higher fees and interest payments.
2. Private Student Loan Consolidation
A student loan consolidation can be done if you have multiple private student loans. When you consolidate, you are combining all of your debts into one so you’ll only have to make one monthly payment. Again, you will also have to pass the requirements to qualify.
3. Pay Off Student Loans In Full
Another option to release your cosigner is to pay off your student loans in full. If the amount of money left on your student loans is not that high and you can manage to make the full payment in advance, then you can release your cosigner from the responsibility of worrying about the loan.
Benefits of Getting a Student Loan Debt Cosigner Release
- It shows your financial independence and ability to manage your own debt.
- It removes the financial risk from the cosigner.
- It reduces the cosigner’s outstanding debt.
- It helps improve the cosigner’s credit score.
Downsides of Getting a Student Loan Debt Cosigner Release
- It removes a fallback option for you in case something goes wrong with your student loans.
- It leaves you vulnerable to a debt burden.
Getting A Cosigner Release On Your Student Loans
The process of releasing a cosigner from your student loan contract can be frustrating and most of the time difficult like many financial decisions. However, if you follow our recommended steps to take control of your finances and your credit, it will significantly lighten your load. Of course, you can also try our suggested alternatives on how to get your cosigner off your student loan.
Aidan has been writing about personal finance for over 6 years. Prior to this, he worked as a Corporate Finance Analyst where he specialized in Due Diligence, Company Valuations and more. He is a CFA charterholder.
