Cosigner Release for Private Student Loans
Two of the most common questions we get in our Financial Aid Forum are, "What loans can I get without a cosigner?" or "My parents don't want to cosign because they don't want another loan over their head." It's a prevalent and enduring problem effecting more and more students each year.
In some cases, federal student loans can be enough to cover your tuition (mostly for in-state public schools or two-year institutions), but affording private college and out of state schools can be much more difficult. In order to afford these schools many students need to rely on private students loans. However, the reality of the situation is that in order to take out a private student loan a cosigner will be required. Many students headed off to college for the first time have a very limited credit history, which means that there is no evidence or history showing the student will pay back the loan. A private loan lender that is going to give you thousands of dollars wants to have confidence that you are going to pay it back. The most significant way that a lender will gain confidence in you is if you have a cosigner with a good credit history. This way the bank knows that if you're not going to pay back the loan, they can go to the cosigner who will.
What is a cosigner release?
There are a lot of different rewards, benefits, and marketing techniques that private lenders use to try and prove their loan is better than their competitor's. One of the benefits that has become popular is cosigner release. A cosigner release means that after you graduate from school and meet any criteria set by your lender, for example make payments on time for 12 consecutive months, you can request that the bank remove your cosigner from any financial obligation. This means that now all of the financial burden that your cosigner took on when you first took out the loan is now removed from your cosigner.
What do you have to do to qualify for a cosigner release?
Different lenders can have different requirements for a cosigner release. Some lenders only require that you graduate from your college or university in order to qualify, while others require that you make 12 consecutive monthly payments before they will approve you for a cosigner release. These requirements are definitely something you'll want to make note of when considering all of your loan options before selecting your lender.
Which lenders offer a cosigner release?
If you're interested in checking out which lenders offer this option, have a look at our private lender comparison tool. It lists some popular lenders and their various perks for student loan offerings. As always, we recommend using all of your free money first, then using your federal loan options, before tapping into your private loan options.