How to Refinance Student Loans With a Cosigner

Student loan refinancing can be an excellent strategy for tackling high-interest debt, but recent college graduates typically struggle to qualify for refinancing on their own since they may not have established credit histories or meet lenders’ income requirements.

Adding a parent or relative with a stable income and solid credit history can improve your odds of qualifying for a loan and securing a better rate. However, if you’re not able to make payments, you could hurt your loved one’s credit, so both parties should be careful before taking this step.

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Best lenders to refinance student loans with a cosigner

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How to refinance student loans with a cosigner

Can you refinance student loans with a cosigner? With many lenders, the answer is yes, and adding a cosigner can also help you get a lower rate so you can save more money.

Beware of refinancing federal student loans

It can often be a bad idea to refinance federal student loans, since you’ll lose all current and future federal protections, including access to certain loan forgiveness programs and federal income-driven repayment plans. Private student loans are usually much better candidates for refinancing, depending on your situation.

Refinancing your loans with a cosigner is similar to applying for a loan by yourself, but there are a few additional steps:

1. Find a lender that allows cosigners on student loan refinancing

Not all lenders allow cosigners, so your first step should be to research various lenders’ policies, including rates and terms.

However, cosigner policies aren’t the only factor you should consider when shopping for a lender. Other key considerations include:

• Repayment terms: Available repayment terms vary by lender, but typically range from five to 25 years. A longer term will give you a lower payment, but you’ll likely get a higher rate and pay more in interest.
• Cosigner release policies: Some lenders will release the cosigner’s obligation to the loan after you make a specific number of payments on time. However, not all lenders offer cosigner releases, so if that’s an important benefit to you and your cosigner, carefully review lenders’ policies.
• Hardship options: Not all refinancing lenders offer hardship options, but some offer deferments or forbearance programs that allow you to postpone your payments. If you work in a volatile industry where layoffs are common, a company’s hardship policies are especially important.

2. Get a cosigner on board to refinance student loans

A cosigner doesn’t have to be a parent; it can be any adult that meets the lender’s requirements and is willing to help. You can ask grandparents, siblings, cousins or good friends to cosign a loan, as long as they have good to excellent credit and are employed or have another source of income.

When you ask a loved one to cosign a loan, make sure you both understand the risks and responsibilities that come with cosigning a loan, and how long the loan will be in repayment.

3. Collect documents and information needed to apply

Refinancing lenders usually allow borrowers and cosigners to apply online, but you may need to submit your information separately. To save time, collect the following information:

• Social Security number
• Employment information, including phone number and address
• Current loan statements
• Financial details, such as your monthly mortgage or rental payments

4. Compare student loan refinancing rates

Most student loan refinancing lenders allow you to check your eligibility and view potential rates with only a soft credit check, which doesn’t impact the credit scores of you or your cosigner. You can use the prequalification tools to comparison shop and find the best rates. to see what options are available and find the best rates

5. Apply to refinance student loans with a cosigner

Once you have identified a lender and loan that matches your goals, you and your cosigner can apply for student loan refinancing. Beyond your personal and financial information, the lender will also ask you to consent to a hard credit check, which can cause your score to drop by a few points.

In some cases, you and your cosigner may be asked to submit additional documentation, such as the following:

• Government-issued identification, such as a driver’s license or passport
• Proof of income, such as recent paystubs or W-2 forms
• Copies if your tax returns if you’re self-employed

6. Sign the student loan refinancing agreement

If you’re approved for a loan, the lender will send you a final loan agreement laying out the terms of refinancing. This loan agreement will include your cosigner and outline their responsibility for the new student loan. Both you and the cosigner will need to sign and agree to the terms of the contract.

You have a few days to review the loan agreement, so be sure to carefully read it before signing. If you change your mind, you or your cosigner can back out as long as the agreement isn’t signed.

7. Repay the refinanced student loans with a cosigner

The first payment due date and monthly payment amounts will be outlined in the loan agreement. Once you and your cosigner have signed on the dotted line, you’ll begin making payments each month.

It’s important to remember that your cosigner isn’t just there for moral support — they’re legally responsible for repaying your loan if you default. If your cosigner will help you with payments, make sure you have an agreed-upon repayment plan and schedule to avoid any misunderstandings.

When lenders allow refinancing student loans with a cosigner

Policies regarding cosigners vary by student loan refinancing company. Generally, lenders don’t require applicants to have cosigners. But they may encourage applicants to add a cosigner to their applications to better their chances of qualifying for a loan.

Even if you do meet the lender’s requirements by yourself, adding a cosigner can still be a good idea. A cosigner decreases the lender’s risk since there is a second person responsible for the loan, so having a cosigner can also allow you to qualify for a lower rate than you’d get on your own.

What your lender looks for in a cosigner

Lenders look at several variables.To increase your chances of being approved for the best-possible terms, your cosigner should meet the following standards:

1. Good credit

Lenders typically require good to excellent credit, meaning your cosigner should have a FICO credit score of 670 or better. The higher their credit score, the better the chances are of getting an attractive rate.

2. Sufficient income

Income requirements vary by lender, but the minimum required for student loan refinancing is usually between $30,000 and $50,000 for either the cosigner or the borrower. However, the lender will also look at the debt-to-income (DTI) ratios — the amount of your monthly income that goes toward debt — to determine whether you and your cosigner can comfortably afford the loan payments.

Lenders may require proof of income, so you and your cosigner may need to submit pay stubs, W-2 forms or recent tax returns.

3. Citizenship

With most lenders, borrowers must be U.S. citizens or permanent residents to qualify for student loan refinancing. But some lenders will allow foreign nationals, undocumented individuals and those with Deferred Action for Childhood Arrivals (DACA) status to refinance their loans if they have a creditworthy cosigner that is a U.S. citizen or permanent resident.

Understand the risks for your cosigner

If you have a family member, spouse, friend or parent cosigning a student loan for you, refinancing may seem like the perfect solution to overwhelming student loan payments. However, there are some substantial risks for the cosigner.

Cosigners share full responsibility for the loan with the primary borrower. It shows up on their credit report and is included in DTI calculations, so cosigning a loan can affect their ability to qualify for other forms of credit, such as mortgages or car loans. And if you fall behind on your payments, it can also damage your cosigner’s credit.

Releasing a cosigner

The risks of cosigning a loan are substantial, so it’s wise to review lenders’ cosigner release policies when shopping for a lender.

Although some lenders allow borrowers to apply for cosigner releases after making a certain number of payments on time, not all lenders offer that benefit. If a cosigner release isn’t available — or if you don’t meet the lender’s eligibility requirements at that time — the cosigner remains responsible for the loan until it’s paid in full.

How to decide if a cosigner is right for you

Can you refinance student loans with a cosigner? Yes, and adding a cosigner to your loan application can increase your chances of qualifying for a loan with competitive rates.

Keep in mind that asking someone to cosign a loan is a huge request; if you can’t afford the payments, your cosigner will have to pay them or risk damage to their credit. If that happens, your relationship could be hurt.

Before asking someone to cosign a loan application, ask yourself the following questions:

• Why do you need a cosigner? If you have poor credit due to mismanaging credit cards or missing payments, that’s an indication that refinancing with a cosigner is a bad idea. Instead, focus on improving your money management skills and paying down debt.
• How financially secure is the intended cosigner? Consider the finances of your cosigner. If your relative or friend is living paycheck-to-paycheck, they may not be able to afford your loan payments if you fall behind, and the responsibility for the loan could cause them significant hardships.
• Do you have other options to manage your debt? Look into alternatives before asking someone to cosign a loan. For example, you may be eligible for a federal income-driven repayment plan that reduces your monthly payment, or for repayment assistance from your employer. These options may be a better choice for you.

Adding a cosigner to your student loan refinancing application could help you save money and pay off debt faster. However, it’s essential to have open and honest discussions before applying for a loan to ensure you’re both on the same page and comfortable with the next steps.