Cosigner Release

Detailed Explanation

When it comes to private student loans, a cosigner is someone who agrees to repay the loan if the primary borrower cannot (usually a parent).

Cosigner release is a valuable feature for both the cosigner and the primary borrower. It allows the cosigner to be removed from the loan obligation, typically after the primary borrower demonstrates financial responsibility by making a consecutive series of on-time payments for a certain period, usually between 12 and 48 months.

Additionally, the primary borrower may need to meet other lender-specific criteria, such as passing a credit check and proving sufficient income to handle the loan payments independently.

This process benefits the cosigner by potentially improving their credit score and debt-to-income ratio, making them eligible for future loans or credit. For the borrower, achieving cosigner release is a sign of financial independence and reliability.

Example

Imagine a borrower who took out a private student loan with their parent as a cosigner. After graduating and securing a stable job, the borrower makes 24 consecutive on-time payments. The loan's terms allow for cosigner release after 24 months of on-time payments if the borrower can also demonstrate sufficient income and pass a credit check.

Upon meeting these criteria, the borrower applies for and successfully obtains a cosigner release, removing the parent from any further obligation on the loan.

Each lender has different cosigner release criteria.

• Ascent Student Loans: Request after 12 months of on-time payments
• College Ave Student Loans: Request after half the payment schedule has been completed
• Earnest Student Loans: Not offered
• Sallie Mae Student Loans: Request after 12 months of on-time payments

Key Articles Related To Cosigner Release

• Why Do I Need A Cosigner For My Student Loans?
• Best No-Cosigner Student Loans

Related Terms

Borrower: The individual who initially takes out the loan and is primarily responsible for its repayment.

Credit Score: A numerical expression based on a level analysis of a person's credit files, representing the creditworthiness of an individual.

Deferment: A temporary suspension of loan payments, often due to financial hardship or enrollment in school.

Refinancing: Taking out a new loan to pay off one or more existing loans, usually to secure a lower interest rate or different repayment terms.

FAQs

How does one qualify for cosigner release?

Qualification typically requires a history of on-time payments, a credit check, and proof of income to ensure the primary borrower can handle the loan independently.

Is cosigner release available on all student loans?

No, cosigner release is a feature of some private student loans. Federal student loans do not offer this option.

How does cosigner release affect the cosigner's credit?

If the borrower has been making payments on time, the release can positively impact the cosigner’s credit by reducing their overall debt obligation.

Can a borrower apply for cosigner release more than once?

If a borrower's initial application for cosigner release is denied, they can usually reapply after meeting any missing criteria, such as a longer history of on-time payments or an improved credit score. However, it might make more sense to simply refinance the loan.