What Is Cosigner Release on Private Student Loans?

If federal aid isn’t enough to cover the cost of education, private student loans can be a helpful solution to bridge the financial gap. These loans can cover expenses that federal aid doesn’t, but they often require a cosigner, especially for college students who may not have a strong credit history. While cosigning a private student loan is a significant responsibility, some lenders offer a cosigner release option. This feature allows the cosigner to be removed from the loan under certain conditions, relieving them of their obligation. Understanding cosigner release options is essential before agreeing to cosign a loan.

What Is Cosigner Release?

Cosigner release is a process that allows the cosigner of a private student loan to be removed from the loan agreement once specific conditions are met. After the release, the cosigner is no longer responsible for ensuring loan payments, and their credit is no longer tied to the student loan debt. This can be a valuable feature for both the borrower and the cosigner.

How to Qualify for Cosigner Release

To qualify for cosigner release, the primary borrower must meet several requirements, typically demonstrating financial independence and the ability to repay the loan on their own. While requirements vary by lender, the most common conditions include:

1. Proof of Graduation
   • The borrower must provide evidence of college graduation. This can be done by submitting a copy of the degree or an official school transcript.
2. On-Time Monthly Payments
   • The borrower must make a specified number of full monthly payments (including principal and interest) on time. Depending on the lender, this may range from 12 to 48 payments.
3. Proof of Income
   • The borrower must be employed and meet a minimum income requirement. This can typically be verified by providing two recent pay stubs or other proof of income.
4. Credit Approval
   • The borrower must meet the lender’s credit requirements independently. This involves the lender evaluating the borrower’s credit history to ensure they can manage the loan without the cosigner’s support.

Benefits of Cosigner Release

Releasing a cosigner from a private student loan can offer several benefits, particularly for the cosigner:

1. Improved Credit and Debt-to-Income Ratio
   • Once released, the cosigner’s credit is no longer tied to the loan, potentially improving their credit score and reducing their debt-to-income ratio. This can enhance their ability to qualify for other types of loans.
2. Flexibility for Future Needs
   • Releasing a cosigner can free up their credit to assist another child attending college or to secure favorable rates on auto or home loans.
3. Peace of Mind
   • Cosigners gain relief from the financial obligation and responsibility of the loan, especially in cases where the primary borrower struggles to make payments.

Choosing a Loan with Cosigner Release Options

Not all private student loans offer cosigner release, so it’s essential to verify this feature before selecting a lender. Having a release option provides a clear debt exit strategy for cosigners, ensuring they won’t remain tied to the loan for its entire duration.

Example: LendKey’s Solutions

LendKey connects students with lenders that offer cosigner release on private student loans. By choosing a lender with this option, borrowers and cosigners can plan for the eventual release, benefiting both parties in the long run. Learn more about LendKey’s private student loans and cosigner release options here.

Final Thoughts

Cosigning a private student loan is a significant commitment, but understanding the cosigner release process can make it a manageable one. By meeting the lender’s requirements, the borrower can relieve their cosigner of financial responsibility, improving the cosigner’s credit standing and providing peace of mind. When considering private student loans, always prioritize lenders that offer cosigner release to ensure flexibility and financial security for both the borrower and the cosigner.