You share responsibility and liability for paying back the debt you cosigned for the student loan on an equal basis. Unless the primary borrower begins missing payments, the lender will not usually turn to you for repayment.
Cosigning a loan carries a number of risks. Be sure to comprehend your rights and obligations as a cosigner before signing the promissory note if you’ve been asked to serve in that capacity.
- What Are The Student Loan Cosigner Rights?
- When Can You Release Your Student Loan Co-signer?
- How Do I Know If I Cosigned a Student Loan?
- What Are The Benefits and Drawbacks Of Student Loan Co-sign?
- How To Get a Co-signer for a Student Loan
- Frenqaly Asked Questions
What Are The Student Loan Cosigner Rights?
A cosigner’s rights on a student loan are governed by the loan agreement provided by the lender. The conditions for obtaining a co-signer release are specified in the loan agreement.
Usually, in order to be released from a loan, a borrower must make several consecutive monthly payments, pass a credit check, demonstrate sufficient income, and maintain an acceptable debt-to-income ratio.
For example, Ascent* allows a borrower to request a cosigner release if the borrower provides proof of the following:
- You must meet the other requirements for eligibility and have a minimum payment history in order to be approved for a loan on your own.
- You have enough money.
- You’ve received your diploma or certificate.
- You are a US citizen or have permanent residence in the US.
To avoid missed payments or late fees, the cosigner may also be able to request deferment, forbearance, and other repayment options.
The primary borrower might need to request those options, though, if the servicer so chooses.
What are the rights of a cosigner on a student loan if the primary borrower fails to pay?
The cosigner has the right to file a lawsuit against the borrower to recover the funds they have contributed to the student loan if the borrower stops making timely payments and ultimately defaults.
When Can You Release Your Student Loan Co-signer?
After receiving your diploma or certificate, making 12 timely principal and interest payments, and satisfying certain credit requirements, you can apply to have your cosigner released from an open and active loan.
After the borrower starts making payments, many lenders advertise a cosigner release as soon as one year later.
The borrower must consistently make 12 or 24 timely payments over the course of the loan, according to the lender’s advertisements.
How Do I Know If I Cosigned a Student Loan?
You’ll know that you’re co-signing a student loan through:
- Check to see if you are listed as a cosigner by getting in touch with the student loan servicer.
- Search for student loans on your credit report. You may have cosigned a loan if you did not take out student loans for your education.
- Visit the Student Aid website. Then you’ll find a list of all federal student loans you have taken out, including any Parent Plus Loans you have taken out for a child or any Graduate Plus Loans you may have cosigned for a student with a bad credit history.
A cosigner is required for many private student loans. Cosigners are not typically required for federal student loans.
What Are The Benefits and Drawbacks Of Student Loan Co-sign?
Benefits of cosigning a student loan:
- The student can get more funds to finance his education: Private lenders typically require good credit history, enough income, and a debt-to-income ratio that is within reason. Due to this, a cosigner with good credit may be able to assist the student in getting the loans required to finish their degree program.
- Students might receive a lower interest rate: The student may be eligible for a lower interest rate by including their creditworthiness on the loan application, which will lower the total cost of the loan.
- The student will improve their credit: As the borrower pays off loans on time, they’ll establish a good credit history, which can aid in raising their credit score. Ideally, their credit rating and income rise to the point where they are qualified for a cosigner release.
Drawbacks of cosigning a student loan:
- There will be a rise in your debt-to-income ratio: If you want to buy a house, cosigning a student loan will increase your debt obligations, lowering your DTI ratio.
- You’re responsible for the loan: If you consistently make late payments, not only will your credit score suffer, but you and the primary borrower may also be legally responsible for the debt. The lender might be able to seize your property, garnish your wages, and deduct money from your bank account if a judgment is rendered against you.
How To Get a Co-signer for a Student Loan
Asking other family members or adults with whom you have a close relationship is a good place to start. Foster parents, grandparents, aunts, and elder siblings are all possible choices. A cosigner might also be a family member, previous supervisor, mentor, or instructor.
Then you’ll go through the following procedure to get him to cosign your student loan:
- Review the student loan contract that you signed when the loan was originated in order to understand the conditions of your loan. Each lender has its own set of requirements for private student loans with a cosigner.
- Keep an eye on the cosigned account and check on the status of your student loan. Check-in with the principal borrower at least once a month to confirm that payments are being made on time.
- Cooperate with your lender: Contact the lenders to find out what your choices are and whether they are prepared to adjust your repayments. As soon as they are able to pay more, you might ask your lender to temporarily cut your monthly payments.
- Collaborate with your co-borrower to come up with a plan for bringing the student loan current and making sure payments are completed on time. You two may decide to split the cost of the student loans.
- Refinance the loan for which you provided a cosigner: Refinance the student loan in your name. This allows you, the cosigner, complete control over the loan and the flexibility to select repayment terms that suit your requirements.
Frenqaly Asked Questions
Marie got her journalism degree from the University of California and is an award-winning financial journalist, who’s responsible for collecting and analyzing information concerning students and young adults within the world of finance.
Marie has spent her career with more than 5 years writing for unique media outlets like Yahoo finance, GoBankingRates, and CNBC. She also teaches them how to plan strategically to get out of loan debts easily.
Her goal is to educate students about the different stages in life that involve finances so they can get their money’s worth.