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What Is a Student Loan Cosigner?

Kat Tretina
What Is a Student Loan Cosigner?
What Is a Student Loan Cosigner?

With the rising cost of college, you can quickly reach the annual borrowing limit for federal student loans. When that happens, what can you do? One option is to take out private student loans. But to qualify, you’ll likely need a student loan cosigner.  

According to a 2021 report from MeasureOne, approximately 92% of all private undergraduate student loans were cosigned.  

To improve your chances of qualifying for a student loan and a better rate, adding a cosigner is critical. Continue reading to learn about the role of a cosigner, what the requirements are to cosign a loan, and some cautions you should be aware of before submitting an application. 

What Is a Student Loan Cosigner?  

A cosigner is someone (often a family member) with great credit and a good job that applies for a loan with you, guaranteeing its repayment if you fall behind.  

Adding a cosigner improves your chances of qualifying for a student loan. And even if you could qualify for a loan on your own, adding a cosigner can still be beneficial. With a cosigner on your application, you’re more likely to qualify for the lender’s best rates. Why is a cosigner so important? It’s because of how private student loans work.  

When you apply for most federal student loans, the lender — the U.S. Department of Education — doesn’t look at your credit score or income. It only considers the cost of your program and your eligibility for federal financial aid.  

Private student loans work very differently. They’re issued by individual banks, credit unions, and specialized online lenders. Student loans can be a risky business since lenders are giving money to young adults, so lenders typically have credit score and income requirements. If you don’t meet their minimum criteria, you won’t qualify for a loan.  

However, lenders understand that college students are unlikely to have established credit histories or full-time jobs, so they offer a workaround: you can add a student loan cosigner to your application.  

Tip: There are some private student loan companies that don’t require cosigners. However, non-cosigned loans tend to have much higher interest rates, so they aren’t always the best choice.  

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What Is a Cosigner’s Responsibility?  

Asking someone to cosign a loan with you is a big favor to ask. When someone cosigns a loan, they are legally obligated to make payments toward it if you fall behind. Because there is a backup if you become delinquent, having a cosigner decreases the lender’s risk, so they’re more willing to work with you and approve your loan application.  

Not only is a cosigner on the hook for payments, but cosigning a loan can impact them in other ways:  

  • Cosigning adds a credit inquiry to their credit reports: When a cosigner applies for a loan with you, the lender will perform a hard credit check. Every hard credit check that occurs can damage credit scores, so that credit inquiry can cause your cosigner’s score to drop by several points.  
  • Acting as a cosigner can affect their eligibility for other forms of credit: Because your cosigner is legally obligated to repay the loan if you can’t or don’t, it can affect their eligibility for other forms of credit. Your cosigner may find that it’s difficult to qualify for a mortgage or car loan as long as the student loan is still outstanding.  
  • Late payments can damage a cosigner’s credit: If you miss a payment or, even worse, enter into default, the lender will report that activity to the credit bureaus. Because your cosigner is also responsible for the loan, late payments and student loan defaults can also damage their credit, making it harder — if not downright impossible — to qualify for credit cards or loans.  
  • A cosigner may not be able to afford the payments: When you miss a payment on the student loan, the lender will pursue payment from the cosigner. If your cosigner is on a tight budget, they may not be able to afford the payments and their other essential expenses.  

As you can see, cosigning a loan is a major responsibility, and there can be long-term consequences that affect the cosigner. Before asking someone to cosign a loan, explore all of your options and make sure you can comfortably afford the payments on your own.  

What Is a Cosigner Release? 

A common question borrowers and cosigners have is, “is it possible for a student loan cosigner to be removed from the loan?” If the lender offers a cosigner release, the answer is yes.  

A cosigner release is when the lender approves the removal of a cosigner from the loan. To qualify for a cosigner release, you typically have to make a certain number of payments on time — such as 24 to 48 monthly payments — and meet the lender’s income and credit score requirements on your own.  

However, not all lenders offer cosigner releases. Some require the cosigner to stay on the loan until it’s repaid in full. If that’s the case, another option is to refinance the loan with another lender. When you refinance, you can apply using solely your information. If you’re approved for student loan refinancing, the existing loan is paid off, and your cosigner is no longer tied to the loan.  

How to Find a Cosigner 

If you need to take out private student loans to cover your remaining education costs, you’ll likely need a cosigner.  

A student loan cosigner can be a parent, relative, or a good friend, as long as they meet the following requirements:  

  • Age: A cosigner must be at least 18 or the age of majority in your state.  
  • Citizenship: In most cases, the cosigner must be a U.S. citizen with a valid Social Security number.  
  • Income: The cosigner needs to meet the lender’s income requirements. In general, the cosigner needs a reliable source of income, such as a full-time job.  
  • Credit: A cosigner for student loans needs to have good to excellent credit. According to Equifax, one of the three major credit bureaus, that range means a score between 670 and 850.  
  • Debt-to-income ratio: Lenders want to see that cosigners have relatively low debt-to-income ratios (DTIs) — a percentage that reflects all of your monthly debts vs. your gross monthly income. . Ideally, lenders look for a DTI of 35% or less, but some lenders will approve applicants with DTIs as high as 50%.  

 To get a cosigner for your loans, follow these steps: 

1) Consider Family Members and Friends

Although cosigners are usually parents, you aren’t required to use a parent as a cosigner. A cosigner can be anyone — including extended family members like grandparents, aunts and uncles, or cousins. A cosigner can also be a close friend that trusts you to handle the loan responsibly. The only caveats are that the cosigner must have good credit, a reliable source of income, and meet the lender’s citizenship and age requirements.  

Once you’ve considered who might be a good cosigner, reach out to them directly. Explain why you need a cosigner and ask if they’d be willing to help you by cosigning your loan. 

Be prepared to make a compelling argument. A cosigner wants to know that you understand the financial risks involved and that you can handle any debt responsibly. Before asking someone to cosign a loan, know exactly how much you need to borrow to pay for college tuition and other expenses, and talk about how you plan to pay it back after you graduate. For example, you may want to mention your career prospects and typical starting salaries in your intended field.  

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2) Review Loan Terms

Once you have identified someone to be a cosigner, you can shop for a loan together. When reviewing your options, look for loan terms that your cosigner is comfortable with. For example, a cosigner may only be comfortable with a loan that has a 10-year term rather than one that is repaid over 15 years.  

3) Discuss Payments

Talk to your intended cosigner about how payments will be handled. To ensure your cosigner feels secure with the arrangement, you may agree to some extra precautions. For example, some ideas to discuss include:  

  • Making payments three days before their due date 
  • Signing up for automatic payments 
  • Sending the cosigner a confirmation when the payment is made 
  • Providing the cosigner with login information to view the status of the account 
  • Notifying the cosigner at least two weeks in advance if you’re in danger of missing a payment due date

4) Consider Forbearance and Hardship Options

As you shop for a loan, be sure to research lenders’ forbearance and financial hardship policies.  

Every lender has its own policies, and not all allow borrowers to postpone payments if they lose their jobs or become seriously ill. With some lenders, the cosigner is expected to take over the payments, with no alternatives available.  

By contrast, other lenders have clear financial hardship policies that allow you to postpone or pause your payments for several months. During that time, your cosigner doesn’t have to make payments either, and the loan isn’t in default; it gives you a few months to get your finances in order so you can resume payments. 

5) Find Out Cosigner Release Policies

Cosigning a loan is a serious commitment. If your cosigner hopes to be released from the loan before it’s paid in full, check out the lender’s cosigner releases policies. Make sure you both know how many payments must be made to qualify, and what credit score and income you’ll need as the primary borrower to get approved for a cosigner release.  

Applying for Student Loans  

If you need private student loans to pay for your remaining college expenses, you will likely need a cosigner to apply with you. Most private student loan lenders have strict credit and income requirements, and most young adults won’t qualify on their own. Adding a cosigner to your application makes it more likely that you’ll get approved and get a better interest rate.  

Once you have a student loan cosigner, compare offers from leading lenders to find the best rates. With Purefy, you can get quotes from top private student loan companies by filling out one simple form, and it doesn’t affect your credit score.  

 Need help with your application? You can schedule a consultation with a student loan advisor. It’s completely free, and you can get expert advice on your available options and help with the application process.  

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Earnest Rate Disclosure

Rates displayed include the 0.25% Auto Pay discount. You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Actual rate and available repayment terms will vary based on your income. Fixed rates range from 4.24% APR to 13.03% APR (excludes 0.25% Auto Pay discount). Variable rates range from 3.83% APR to 12.53% APR (excludes 0.25% Auto Pay discount). Earnest variable interest rate student loans are based on a publicly available index, the 30-day Average Secured Overnight Financing Rate (SOFR) published by the Federal Reserve Bank of New York. The variable rate is based on the rate published on the 25th day, or the next business day, of the preceding calendar month, rounded to the nearest hundredth of a percent. The rate will not increase more than once per month. Although the rate will vary after you are approved, it will never exceed 36% (the maximum allowable for this loan). Please note, Earnest Private Student Loans are not available in Nevada. Our lowest rates are only available for our most credit qualified borrowers and contain our .25% auto pay discount from a checking or savings account. It is important to note that the 0.25% Auto Pay discount is not available while loan payments are deferred.

Nine-month grace period is not available for borrowers who choose our Principal and Interest Repayment plan while in school.

Earnest clients may skip one payment every 12 months. Your first request to skip a payment can be made once you’ve made at least 6 months of consecutive on-time payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest’s discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.

Loan Eligibility criteria: Eligible students must: 1) For college Freshmen, Sophomores and Juniors, attend, or be enrolled to attend, a Title IV school full-time. For college Seniors and Graduate students, attend, or be enrolled to attend, a Title IV school at least half-time; and 2) be pursuing a Bachelor’s or Graduate degree. Earnest private student loans are subject to credit qualification, completion of a loan application, verification of application information, self-certification of loan amount, and school certification.

Responsible borrowing tip: Explore all scholarship, grant and federal options before applying for a private loan.

Earnest Private Student Loans are made by One American Bank, Member FDIC. One American Bank, 515 S. Minnesota Ave, Sioux Falls, SD 57104.

Earnest loans are serviced by Earnest Operations LLC, 535 Mission St., Suite 1663 San Francisco, CA 94105, NMLS #1204917, with support From Navient Solutions, LLC (NMLS #212430). One American Bank and Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by agencies of the United States of America.

ELFI Rate Disclosure

Education Loan Finance is a nationwide student loan provider offered by Tennessee based SouthEast Bank. ELFI is designed to assist students financially with receiving their education. Subject to credit approval. See Terms & Conditions. Interest rates current as of 10-24-2022. Variable interest rates may increase after closing but will never exceed 18.00%. Interest rates may also differ from the rates shown above. The term of your loan, financial history, and other factors, including your cosigner’s (if any) financial history can affect the interest rate. For example, a 10-year loan with a fixed rate of 7% would have 120 payments of $11.61 per $1,000 borrowed. Rates are subject to change.

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College Ave Student Loans products are made available through Firstrust Bank, member FDIC, First Citizens Community Bank, member FDIC, or M.Y. Safra Bank, FSB, member FDIC.. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
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Minimum loan amount $1,000, as certified by your school and less any other financial aid you might receive.
This informational repayment example uses typical loan terms for a freshman borrower who selects the Deferred Repayment Option with a 10-year repayment term, has a $10,000 loan that is disbursed in one disbursement and a 8.35% fixed Annual Percentage Rate (“APR”): 120 monthly payments of $179.18 while in the repayment period, for a total amount of payments of $21,501.54. Loans will never have a full principal and interest monthly payment of less than $50. Your actual rates and repayment terms may vary.
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Ascent Student Loans are funded by Bank of Lake Mills, Member FDIC. Loan products may not be available in certain jurisdictions. Certain restrictions, limitations; and terms and conditions may apply. For Ascent Terms and Conditions please visit: www.AscentStudentLoans.com/Ts&Cs.

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