Cosigner releases can be tricky. If you hold a private student loan, you may be wondering how to remove a cosigner from your student loan. Aside from lenders like Funding U, nearly all private student loans in the U.S. require a student to find a cosigner for their loans.
It’s common practice to have a parent or loved one cosign on your private student loan. But what happens when your student loans have a negative effect on your cosigner’s credit score or ability to qualify for a loan themselves?
Your student loan cosigner may want to remove their name from the loan as soon as possible. You may want that too.
It is a crucial step for both you and the cosigner, and it marks a key point in your education and your life. There is so much more to know about the cosigning process, though. The better you understand it, the more easily you will be able to remove a cosigner from a student loan.
What does “releasing a cosigner” actually mean?
You need to understand what a cosigner does to grasp the removal process. Many lenders like to get a cosigner on private loans because it gives them a backup in the case of default or missed payments. This practice is often a vital step in allowing students to continue their education.
Many college students have not worked full time before starting their studies, and they typically have little to no money in the bank. They may also have little or no credit history. The cosigner solves these problems. By attaining a cosigner, you’re showing your private lender that there is at least one other person who can afford to repay your loan on your behalf if needed.
And in reverse, to remove a cosigner, you have to show the lender that you are financially capable of handling the loan yourself. It typically comes after a period of regularly scheduled payments or after a certain percentage of your loan has been repaid.
When you prove that you no longer need your cosigner to pay off your loan, the lender feels comfortable enough to let them off the hook.
How to remove a cosigner from a student loan
There are specific criteria you need to meet before your cosigner can be released from your loan.
These requirements typically involve some combination of the following:
1. Get your credit score up
A factor that plays into loans of all kinds is your credit score. Most lenders will have a credit score minimum threshold that you must meet before being considered for a cosigner release.
Here’s one key thing to do to get your credit score up: make your student loan payments and any other payments on time.
2. Make the minimum number of payments
Most cosigners will be released after the borrower has completed that minimum amount of payments specified in the agreement. The lender will determine the number of payments and time.
Depending on the lender, you may also be able to consolidate your repayments into a lump sum.
It is crucial that you keep up with these payments without default. Most lenders will not consider a cosigner release if the borrower has any history of late payments.
3. Prove a steady income through your employer
If you’re making a certain amount of money, there is reasonable motivation for the lender to let your cosigner out of their agreement. Being gainfully employed shows that you will have a consistent stream of income to allow you to pay off your debt for the foreseeable future. Employment and a steady income are crucial.
4. Graduate from your program!
If you go through all the trouble of getting a loan and don’t even bother to graduate, it is a bad sign to your lender. They have no tangible reason to find you stable enough to make your own repayments.
Graduating also shows employers that you are able to buckle down and handle commitment. It demonstrates that you have given yourself opportunities to make a decent living in the future. Even if you lose your job early on, a degree gives you the ability to pick up and find another job quickly.
What to expect when the cosigner is released
When the cosigner is released, their credit score may go up. Free of their financial obligation to be your backup, they can embark on new financial endeavors.
This freedom is only possible if the installments had been properly repaid until the point of their release. The cosigner could benefit in a variety of ways from release, including:
A newfound sense of stability
When a cosigner agrees to take part in your loan, they are putting their financial well-being at risk. Even if they love and trust you, you could still be irresponsible with your payments or hurt their financial position in the long run. After they’ve been released, they will be able to start anew. They’ll have full control over their income and no worry about dedicating payments to your loans.
Sending more loved ones to college
When a cosigner is release from one loan, it can free them up to support another child or family member along the same journey. It’s extremely common for cosigners to recommit to new loans later.
Finding a way through college without a cosigner
Cosigner loans are the norm in the private student loan world, but they aren’t the only way. Funding U is one of a handful of lenders to make no cosigner student loans.
No cosigner student loans from Funding U
At Funding U, we don’t look at your parents’ credit; we look at you, your academic progress, and your financial plan. Apply online.
Check out our latest blog posts for tips and useful info about managing money in college, navigating the job market, and more.
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