If you’re like countless other college graduates across the nation, you likely had a parent, family member, or friend cosign for your initial student loans. In fact, your cosigner’s excellent credit may have made it possible for you to finance your college degree. But now that you’re a graduate, and are presumably hard at work on your career, it’s probably time to show your cosigner how much you appreciate their assistance. What better way to say ‘thank-you’ for supporting your education than by releasing them as a cosigner on your student loan?
Although releasing a cosigner from your existing student loan is certainly possible, it can be a frustrating undertaking. Each lender has its own benchmark requirements (for example, 36 on-time payments) and these requirements are subject to change at the lender’s discretion. This can lead to a long, drawn out process for students who are eager to take full financial responsibility for their loans. By contrast, refinancing into a new loan altogether can often be accomplished in a fraction of the time, and with far less aggravation.
Here’s how to refinance your student loans to release a cosigner in three easy steps:
1. Research opportunities to refinance your federal or private student loans on your own.
You may decide to seek out a fixed rate student loan where the interest rate remains the same for the duration of the loan. Or, you may decide to refinance into a variable rate student loan, where the interest rate adjusts each month based on the current rates available. Both types of loans come with their own benefits, such as a consistent monthly payment for fixed rate loans, or the potential for greater savings over time with a variable rate loan. Regardless of the type of loan you choose, make sure you thoroughly research your options and are comfortable with your selection.
2. Submit your refinancing application and supporting documentation.
Once you’ve decided which type of loan you want, you’ll need to fill out your application and submit it to the lender. The lender will also require supporting documentation, including proof of income/employment, credit reports, bank statements, or other financial reports to verify that you have the ability to repay the loan without the need for a cosigner.
3. Wait for your approval.
If you qualify to refinance your student loans on your own, your cosigner will be released from their financial responsibility affixed to the original loan. The new loan will be in your name only, and your cosigner will no longer be responsible for payment should you default or stop paying.
Keep in mind that in order to be approved to refinance, you will need to have clearly demonstrated your ability to pay back your loans on your own. To that end, you will need to show at least twelve months of on-time student loan payments that have been made from your account. If your cosigner has been making your payments, you’re less likely to be approved to refinance on your own.
Your credit will also need to reflect that you have been paying all bills (not just loan payments) on time, for an extended period of time. Lenders will also examine your debt-to-income ratio to confirm that you are a responsible spender who honors their financial obligations. Lenders may also need proof that you have a stable job, which you’ve maintained consistently. Frequent job changes may prompt lenders to deny your application to refinance.
If you’re ready to release your cosigner from your student loans, Contact LendKey today. We have a variety of student loan refinancing options available that will help you simplify your finances, as well as lower your monthly payments and interest rates.