Every student’s biggest fear when it comes to private student loans is not qualifying. Having a cosigner can help prevent that. The thing is you may not want a cosigner for the entire life of the loan. In that case, you’ll want to check with different lenders to see who offers a cosigner release policy. But what is a cosigner release policy? Glad you asked. Let’s get into it.
What Is A Cosigner?
First off, let’s define what a cosigner is. A cosigner is someone who takes on the financial and legal responsibility of the loan along with you. If you miss a payment, it’s up to the cosigner to make it up. Additionally, any missed payments will not only affect your credit but theirs as well.
You’ll typically see cosigners for private student loans. This is because most students don’t meet the credit score requirement. For that same reason, you won’t see federal student loans with cosigners. Since they don’t have a credit score requirement, there is no need for cosigners.
When choosing a cosigner, make sure that it’s someone you trust and who has good finances. This would mean having a good credit score and stable income.
>> MORE: What is a student loan cosigner?
What Is A Cosigner Release Policy?
Cosigner release policies free cosigners from legal and financial responsibility to the loan. Hence, releasing them. While each lender has their own set of requirements for the policy, there are some that overlap. The most important thing is that you demonstrate financial responsibility. Normally if you can do that, you can apply to release your cosigner.
Why Might You Want to Release Your Cosigner?
There are many reasons to want to release your cosigner. On your end, it’ll be one step closer to being financially independent, which is a pretty big deal. For your cosigner, it’ll release them from your debt. It’ll also help with their credit since they will no longer have an open account on their credit report.
Also, releasing your cosigner will lessen any tension there is as a result of sharing debt. Finally, it can help avoid messy situations later on. For example, sometimes if a cosigner passes away, the loan will enter default. If the roles were switched, then the loan would become the responsibility of the cosigner. To avoid these complicated scenarios, releasing your cosigner is a good idea.
How to Release Your Cosigner
So, we know the what and the why, but what about the how? How do you release your cosigner? Here’s what you have to do:
You have made at least 12 consecutive payments on time
There has to be a history of you making the payments on time. The exact time frame can range from 12 months to 48 months, or even 5 years! It depends on the lender. Apart from this, the payments need to be consecutive. In other words, without any forbearance or deferment. So, if you’ve experienced that recently, you’ll have to set the clock back to zero.
This is extremely important. Remember, the whole point of a cosigner is having a safety net in case you can’t make a payment. So, to release them, you have to prove to lenders that they can trust you to make your payments on time.
You have good credit and a stable income
Most private lenders require that you meet a minimum credit score. You also have to show that you have the finances necessary to make payments. This means having enough money to afford your current lifestyle and pay back the loan. If you now meet the credit and finance requirements, then you’re in good shape to move on.
Submit an Application
Of course, you’ll want to check with your lender for any other requirements they may have. Once you meet all of them, you can request an application from them. Some may even have them available online. Check with your lender to see where you can get one.
After receiving the application, fill it out and gather any documents that you’ll need. You’ll mostly need documents about your finances. You’ll be able to find out exactly what you need from your lender. Make a copy of everything and save every interaction that you have with your lender. This will help protect you in case something comes up down the line. It’ll also make the process easier.
It’s important to note that the process may be long and lenders can reject you. Talk with your cosigner and make sure this is what you want to do before applying.
What to do if your cosigner release is not approved
If you’re struggling to get approved for your cosigner release, a great option is to consider refinancing your student loan under just your name.
>> MORE: Compare the best student loans for refinancing without a cosigner:
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Final Thoughts from the Nest
A cosigner release policy is a great option to have for the future. But like all financial decisions, they require some thought before moving forward. If you and your cosigner decide this is the right move for you, then it’s time to submit the cosigner release application with your lender.
To find private student lenders with cosigner release policies, sign up with Sparrow for an easier process. To get started, click here.