Do private consolidation loans offer cosigner release?

Some lenders offer cosigner release as an option on their private consolidation loans. Typically, these require 12, 24, 36 or 48 months of consecutive, on-time payments by the primary borrower. The primary borrower must also satisfy credit criteria.

In practice, it is difficult to qualify for cosigner release. The credit criteria are often very strict because the lenders are aware that the cosigner may have been secretly helping the primary borrower make his or her monthly loan payments. The last thing the lender wants to do is have the primary borrower default a few months after the cosigner release is effective.

If the borrower qualifies for the private consolidation loan on his or her own, without a cosigner, consolidating the private student loans effectively releases the cosigner from his or her obligation. The new consolidation loan pays off the old loans. However, interest rates may be higher without a cosigner. Borrowers who have been unable to qualify for cosigner release with their current lender may be able to use a private consolidation loan to obtain something similar to a cosigner release.