Refinancing your student loans with a co-signer can help you lower your monthly payments or get a lower interest rate. When you refinance, a private lender pays off your current student loans and replaces them with a new loan that has different terms.
Having a co-signer can make you a stronger candidate in the eyes of lenders. A co-signer agrees to share legal responsibility for repaying the loan, and their income and credit history can strengthen your application. If you have a low income, poor credit, or simply want a better rate, refinancing with a co-signer could be a good option for you.
Lenders want borrowers who will pay back their loan, so they look at credit history and income when making approval decisions. Sometimes, you may need a stronger financial profile to get approved, which is where a co-signer can help. Co-signing with someone who has a stronger financial history can get you better terms on your loan, such as a lower rate.
Refinancing with a co-signer can improve your chances for approval and get you a better rate. For example, some lenders report that a majority of approved borrowers for refinancing had co-signers.
A co-signer is most beneficial when your credit score is fair or low, or if you have a low income, bad credit history, or a high debt-to-income ratio. In some cases, having a co-signer may be essential for approval, such as for borrowers with a history of bankruptcy. Additionally, international and DACA students may need a U.S. citizen co-signer to be eligible for some refinance lenders.
Co-signer release removes your co-signer from legal responsibility for the loan. To qualify for release, you typically need to make a set number of consecutive, on-time payments. Each lender sets its own requirements for co-signer release, so make sure you understand the terms before applying.
Co-signing a loan comes with risks, as you become legally responsible for repaying the loan. Late or missed payments can affect your credit, and getting off the loan usually requires a co-signer release or the primary borrower refinancing the loan in their name alone. It’s important to understand the risks before agreeing to co-sign a loan. content to make it easier to understand:
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