Borrowers often report that it is difficult to qualify for cosigner release on their private student loans. According to the Consumer Financial Protection Bureau (CFPB), less than 10% of borrowers who apply for cosigner release and less than 1% of borrowers overall successfully obtain cosigner release.
Lenders typically require that the borrower make 12, 24, 36 or 48 consecutive payments on-time and satisfy credit criteria to qualify for cosigner release. Generally, borrowers who show any signs of financial difficulty will not be approved for cosigner release.
How to Increase the Odds of Cosigner Release
To increase the chances than an application for cosigner release will be approved:
The application for cosigner release should be submitted by the borrower, not the cosigner.
All of the monthly loan payments should be made on-time, by the due date. Although many lenders have a grace period for receiving payments after the due date, this affects only whether the payment is reported as late to credit bureaus. For cosigner release, the payments must all be received by the due date.
Continue making the monthly loan payments on-time, even after submitting the application for cosigner release. A borrower who makes the required number of consecutive, on-time payments, but is late with a payment while the application for cosigner release is still being processed, is unlikely to be approved.
Borrowers who sign up for auto-debit, where the monthly payments are automatically transferred from the borrower’s bank account, are more likely to qualify for cosigner release.
All of the monthly loan payments should be made by the borrower, not the cosigner. If the payment is received from the cosigner, the lender may question whether the borrower is capable of making the loan payments on his or her own.
Borrowers should have stable employment with sufficient income to afford the monthly loan payments. The monthly loan payments from all of the borrower’s student loans should be less than 10% of the borrower’s gross monthly income. Borrowers who have recently changed jobs may want to wait before applying for cosigner release.
Borrowers who use a forbearance or partial forbearance or other loan modifications or accommodations are unlikely to qualify for cosigner release.
Borrowers should have a very good or excellent credit score. Borrowers with a higher credit score are more likely to qualify for cosigner release. Many lenders use the same credit criteria for cosigner release as they use for approving a loan to a borrower without a cosigner.
Borrowers with a bankruptcy discharge, foreclosure, repossession, charge-off, and delinquency or collections activity on any debt are unlikely to qualify for cosigner release.
If a borrower’s application for cosigner release is not approved, the borrower should reapply after addressing the reason for the denial. For example, if the borrower is denied cosigner release because the borrower has not made the required number of consecutive, on-time monthly loan payments, the borrower should apply again after fulfilling this requirement.
Alternatives to Cosigner Release
If the borrower does not qualify for cosigner release, the main alternative is for the borrower to refinance the loan without a cosigner. The new loan pays off the old loan, thereby, releasing the cosigner from his or her obligation to repay the debt. Options for refinancing the cosigned loans include a private consolidation loan and non-education loans, such as a personal loan from a bank or credit union or a home equity loan. The borrower could also pay off the cosigned loan in-full.