When opting to refinance your student loans with a private lender, you face another decision: whether to include a cosigner or not.
Do You Need a Cosigner to Refinance Student Loans?
No. Not all borrowers will need a cosigner to qualify for a student loan refinance, but if you haven’t had enough time to build a strong credit history and high credit score, you will need a creditworthy cosigner to get approved for a refinance loan.
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Even if you are able to qualify on your own, you may want to apply with a cosigner with stronger credit history to qualify for a better rate. A cosigner can be anyone, but is commonly a spouse or family member.
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How to Refinance Student Loans Without a Cosigner
Now that you have a good job and established credit, you may want to refinance your student loans on your own, or refinance specifically to remove a cosigner from existing loans.
Usually, you will need strong credit and at least two full years of income history. Depending on your credit, you may end up with a higher interest rate on your own than if you applied with a cosigner. If you’re willing to pay a higher interest rate to have the loan in your name only, or do not have a cosigner to apply with, this may be the right option for you.
The actual refinancing process is the same with or without a cosigner. There are four simple steps:
- Locate your student loans
- Decide what loans you want to include
- Compare student loan refinance companies
- Apply
For a more detailed breakdown check out How to Refinance Student Loans.
What is a Cosigner?
A cosigner is a person who agrees to borrow the loan with you. Basically, you are leveraging their stronger credit and employment history to get loan approval, or a better rate.
When you ask someone to cosign for you, you are asking them to take equal responsibility for repaying the loan. The loan will show up on their credit report in addition to yours, and they will be obligated to pay the money back if you don’t.
Any payments you miss will affect their credit as well as yours.
Student Loan Refinance Cosigner Release
Many lenders do not offer a cosigner release option on a refinanced loan. The way to release a cosigner in most instances is to apply for a newly refinanced loan in your own name. If a cosigner release option does exist (example: U-Fi/Nelnet), you will be required to make a certain number of consecutive payments on-time, meet credit requirements, and show proof of income. If your request for cosigner release is approved by your lender, your cosigner will no longer share responsibility for paying back the loan. If you’re not approved, check with your lender to find out when you may be able to apply again.