If you’re interested in possibly refinancing your student loans, but you don’t think your credit history is strong enough, there are options that might help. One is to refinance student loans with a cosigner.
A cosigner could potentially help you qualify for a refinanced loan. But is taking out a new loan with a cosigner the right choice for you? There are pros and cons to carefully consider in order to decide if student loan refinance with a cosigner makes sense for your personal situation.
Table of Contents
- What is a Cosigner on a Loan?
- Can a Cosigner Refinance a Student Loan?
- Finding a Cosigner
- Pros and Cons of Having a Cosigner
- Using a Cosigner When Refinancing Your Student Loans
- Things to Consider if You’re Asked to Cosign a Loan
- How to Remove a Cosigner After Refinancing
- Refinancing Student Loans With SoFi
Key Points
• A cosigner with strong credit can help you qualify for student loan refinancing and potentially secure a lower interest rate.
• If you fail to make payments, your cosigner is legally responsible for repaying the loan, which can impact both of your credit scores.
• Refinancing federal loans with a cosigner makes them ineligible for federal benefits like income-driven repayment plans and loan forgiveness.
• Asking someone to cosign a loan is a big request—approach the conversation respectfully and demonstrate financial responsibility.
• Cosigners should understand the risks, stay informed about payments, and be prepared for potential financial consequences.
What Is a Cosigner on a Loan?
A student loan cosigner is someone who legally agrees to pay your debt, such as your student loan debt, in the event that you can’t make the payments yourself. The exact terms will vary based on the loan type and lender, but in general, this person signs your loan with you and accepts responsibility for your loan if you are unable to pay your debt.
Responsibilities of a Cosigner
A cosigner on a student loan agrees to take on equal responsibility for repaying the loan. Any late or missed payments or student loan default by the borrower could harm the cosigner’s credit.
How Cosigners Affect Loan Approval
When a borrower adds a creditworthy cosigner to their loan application, it could help approve their chances of qualifying for the loan and securing a lower interest rate if the cosigner has a strong credit and financial history.
Can a Cosigner Help You Refinance a Student Loan?
If you’ve decided to refinance a student loan, a cosigner may help you qualify if your own credit is not strong enough.
Creditors review a variety of factors to determine whether or not they will give someone a loan. Things like a low credit score or a credit history that’s not robust enough can serve as an indicator to lenders that an individual could be a credit risk. Adding a creditworthy cosigner could make a potential borrower appear less risky, since there’s another person — one with a strong financial and credit background — to help guarantee repayment of the loan.
One important thing to note about student loan refinancing — either with or without a cosigner — is that if you are refinancing federal student loans, they will be ineligible for federal benefits like income-driven repayment and federal deferment.
Recommended: Applying for a Student Loan Without a Cosigner
Finding a Cosigner
If you can’t qualify for a loan based on your own credit history or current income, student loan refinancing with a cosigner who has a strong credit history may help improve your prospects.
Who Makes a Good Cosigner
When choosing a cosigner, you want someone with a good credit history who also has steady employment and a good income. In addition, you want an individual you can trust to repay the debt in the event you can’t. And finally, because cosigning a loan is a big commitment, it’s important to choose someone you will feel comfortable asking.
How to Ask Someone to Be Your Cosigner
Being a cosigner is a big responsibility, so how you ask someone to cosign is important. Treat the request with respect. Be open and honest about why you need to refinance student loans with a cosigner. Explain, for instance, that you are recently out of school and don’t yet have a strong credit history. By applying with a cosigner you are more likely to be approved for a refinance loan and get a lower interest rate. Also, detail your plans for repaying the loan so the other person knows you are serious about and committed to handling your debt.
Should a parent cosign a student loan, or should any relative or friend for that matter, it’s important to make them aware of the responsibilities and legal obligations involved. In addition, be sure they are prepared to pay for the loan if you are not able to do so. They should also understand that anything negative regarding the loan, such as late payments, can affect their credit.
Pros and Cons of Having a Cosigner
Taking out a loan with a cosigner is a significant commitment, so it’s worth considering the pros and cons. What’s right for you will depend on your personal and financial situation.
One of the most notable benefits of refinancing with a cosigner is the potential to qualify for a loan that may not have been an option otherwise. A cosigner could also possibly help you qualify for a lower student loan interest rate than what you could receive on your own. If you have little to no credit history or bad credit, it could help to refinance student loans with a cosigner by giving you an opportunity to begin strengthening your credit over time.
On the other hand, there can be some drawbacks to refinancing with a cosigner. If you fail to make payments on your loan, your cosigner will be responsible for repaying your debt. As a result, missed payments will likely reflect on both of your credit histories. This could also negatively impact your personal relationship with your cosigner.
💡 Recommended: Student Loan Calculator
Using a Cosigner when Refinancing Your Student Loans
When you’re refinancing your student loans, enlisting a friend or family member to cosign your refinanced loan could help strengthen your loan application.
Again, keep in mind that acting as a cosigner has risks — if you don’t pay back your loans, your cosigner is on the hook. It’s a big request, so take some time to think about how you’ll make it. Here are some additional tips that may help inform your conversation:
1. Asking respectfully. You’ll want to broach the subject thoughtfully and respectfully. You’re asking the person for a serious commitment, so asking with tact to show you understand the gravity of your request is crucial.
2. Showing your dedication. As noted, it’s also important to make it clear to your cosigner that you’re going to be making timely payments on the loan. One simple way to do so is by providing them with regular updates.
3. Illustrating to your cosigner that you understand the intricacies of your loan. They’ll be responsible for the loan if you fail to make payments, so they’ll likely want to make sure you understand the responsibility you’re taking on — and asking them to take on.
Things to Consider if You’re Asked to Cosign a Loan
If you’ve been asked to cosign a loan, be aware that serving as a cosigner can come with consequences for your finances if the primary borrower fails to make payments. If you’re a family member or friend with excellent credit and a well-paying job, you could be a candidate as a cosigner. If you have some hesitation, here are a few steps you can take:
1. Talking it out with the borrower. The borrower is going to use your name and credit history to take out a loan. It can be helpful to understand why they feel they need a cosigner while making sure they have the means to repay the loan.
2. Following up often. Keeping the lines of communication open so you are aware of any issues can be helpful for both parties. If need be, you could discuss making payments on their behalf to avoid the impact of a late or missed payment on your own credit score.
3. Accepting negative outcomes. Even if you’ve done everything you can to ensure the borrower is trustworthy, something might come up where they let you down. Your credit score might take a hit and you might be responsible for making payments yourself. Remember that this could happen, so accepting it as a possibility may be helpful.
Cosigning a loan is a big responsibility that can have implications on your financial future, so take some time to consider the idea.
If you decide not to cosign, you can let the requester down gently by trying to help them think of some alternative options to secure the loan or money they need.
How to Remove a Cosigner After Refinancing
Some lenders allow cosigners to be removed from a loan through a cosigner release. This allows the cosigner to be officially released from the loan and all the responsibilities that come with it. Typically, the primary borrower has to apply for a cosigner release with the lender.
Depending on the terms of the loan, the cosigner may be able to be released if the primary borrower has graduated from college and meets certain requirements as stipulated by the lender. Typically these requirements include such things as the primary borrower making one to two years of on time payments, having a good credit report and no loans in default, and being in a stable job with a steady income.
If your lender doesn’t offer a cosigner release, another way to take a cosigner off your loan is to refinance your student loans again. When you refinance, you replace your old loans with a new loan that has new terms. If you can qualify for the refinance on your own, you won’t need to include the cosigner on the new loan.
Refinancing Student Loans With SoFi
If you’re interested in refinancing student loans but your credit isn’t strong enough, enlisting a trusted person with a strong financial background as a cosigner may help you qualify for a loan and/or get a lower interest rate. Or, if your credit has strengthened over time, and you can qualify on your own, you can consider refinancing without a cosigner.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
How does adding a cosigner affect my interest rate?
A cosigner with strong credit and a solid financial background may help a borrower qualify for a lower interest rate when refinancing a student loan. Generally, the more creditworthy the cosigner is, the better a borrower’s chances of getting a lower rate.
What credit score does my cosigner need?
The credit score a cosigner needs for a student loan refinance depends on the lender’s specific criteria. Typically, many lenders look for a credit score of 670 or higher.
How long will my cosigner be responsible for my loan?
A cosigner is generally responsible for a loan until the loan is repaid in full. However, a cosigner may be able to be released from a loan through a cosigner release option — if a lender offers it and the primary borrower meets specific criteria set by the lender. Another option is for the primary borrower to refinance the loan again in their own name only, without the cosigner.
Do I need a cosigner for student loan refinance?
The specific requirements for refinancing a loan with a cosigner will depend on your credit history and income (among other factors) and the eligibility requirements of the lender. Borrowers who have a less than stellar credit history may find adding a cosigner to their application allows them to qualify for a student loan refinance and a more competitive interest rate.
Can I consolidate my student loans with a cosigner?
When you consolidate federal student loans through the Direct Consolidation Loan program, you combine all your current federal loans into a new loan with one payment. With Direct Loan Consolidation, you typically don’t need a cosigner.
Can a cosigner become the primary borrower?
In order for a cosigner to become the primary borrower of a student loan, the loan would generally need to be refinanced in the cosigner’s name.
SoFi Student Loan Refinance SoFi Loan Products
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).
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