Refinancing My Student Loans With a Co-Signer

Sometimes it can be harder to qualify for a loan or you might get bad rates without a strong credit score or steady income. In this case, it might be useful to bring on a cosigner, though it’s important to weigh the risks and benefits.

What is a consigner?

A cosigner is someone who applies for a loan with you and agrees to pay off the debt if you do not make payments. Lenders are more confident about giving you a loan or better terms because someone else is also responsible for paying the loan.

How do I know if I need a cosigner?

You can usually find out from your lender whether they allow co signers and if a cosigner will help your application. Every lender is different, and some may allow you to apply with a cosigner while others may reject your application and recommend a cosigner. Lenders will usually look for you to have a strong financial profile (including credit score, steady income, etc.), so if you are weak in certain areas having a cosigner may help you get approved or get better rates.

Here are some lenders that allow you to refinance with a cosigner (support keeping Snowball free by using our referral links):

• Commonbond
• SoFi

What are the risks for your cosigner?

Cosigning a loan is a big deal so it’s important to understand the risks. If a primary borrower makes late or no payments this could negatively impact the co-signer’s credit. Cosigners assume the same responsibility of the loan as the primary borrower and the loan could affect their own credit or prevent them from qualifying for other loans. You are benefitting from this person’s financial profile and they are trusting you with their credit.

Who should I ask to be my cosigner and what does your lender look for in a strong cosigner?

Besides needing to find the right lender and someone who will be your cosigner, you also need a cosigner who is financially qualified. People often ask a parent, guardian, other family member or a close friend or mentor. Lenders often look for similar characteristics to what they look for in a good refi candidate. To improve your chances, your cosigner should try to meet the following:

• Good credit: A common reason you might be rejected for a student loan refinancing is because of bad credit or an insufficient credit history. Different lenders have different credit requirements for primary borrowers and cosigners, though it’s best to find a cosigner with a credit score of 700 or above. This will also ensure that you can get better rates.
• Strong income: Many primary borrowers might be just starting out their jobs or their income is too low or unstable. Lenders want to make sure that cosigners have enough and steady income to pay off the loan in case the primary borrower cannot make the monthly payments. Your lender will also look at you and your cosigner’s debt-to-income ratio, so if your cosigner already owes a lot of debt relative to their income, they might also not qualify.
• Good work and residence history. Oftentimes in the early stages of your career you might switch jobs every two years or move residences to seek opportunities in new cities. Lenders will want a cosigner to have a stable job history and prefer those who have lived in the same residence for longer.

What is the process of cosigning a student loan refinancing?

Here are some steps that a cosigner might take:

• Evaluate lenders as primary borrower and see if you need a cosigner: If you do need one, find out which lenders allow cosigners – make sure you research and compare lenders.
• Find a cosigner who is comfortable with helping you refinance your student loans: Once you find someone who meets the characteristics above, you will need to ask this person to be your cosigner, make sure they understand all of the risks and responsibilities, and have them agree.
• Get all the preliminary documents you need to get a student loan refinancing rate: You will usually need basic personal information for you and your cosigner (e.g., social security, employment & financial information, etc.). The lender will usually ask for some preliminary information, potentially do a credit check, and offer you an estimated rate. Let Snowball help you get your estimated rates.
• Decide on a lender, apply, and finalize the student loan refinancing. Once you’ve decided on your lender, you should apply for a student loan refinancing. Make sure that you provide accurate information for you and your cosigner and that you have all the relevant backup information. Once you are approved, the lender will send you a final loan agreement that talks about all the terms of the refinancing and what you are getting into. Both you and your cosigner need to look through this loan agreement and agree on the terms. Once you sign the document you cannot back out of the final loan terms.
• Start repaying your student loan. Make sure you understand the first payment due date and subsequent monthly payments. You should remember that the cosigner is legally responsible for repaying your loan if you default on it, so make sure that you communicate and are transparent with your cosigner on a payment schedule.

Can you release a cosigner after you refinance your student loans?

This will depend on the lender – some lenders have options in place to allow primary borrows to release their cosigners in the future, though most will require that the primary borrower is the one who initiates the process.

What happens if me or my cosigner passes away before the student loan is repaid?

Usually cosigners on privately refinanced student loans are legally responsible for the debt if the primary borrower dies. If the cosigner dies, your debt might automatically enter default, so make sure you and your cosigner understand from your lender what will happen in a worse case scenario.

What questions should I ask before getting a cosigner?

• Do I even need a cosigner for student loan refinancing? Understand how your approval is rate is affected if you have and don’t have a cosigner.
• Why do I need a cosigner? It’s important to get to the root of why you need a cosigner. Is it because your credit score is bad or you are not good at balancing your bills? If you can get on a plan to improve your financial wellness, it might be better for you to work on building your credit or money management for a few months instead.
• How will this cosigned loan affect my relationship with my cosigner? Money often can make personal relationships turn bad, so make sure you are comfortable dealing with the potential repercussions.
• Am I comfortable talking openly to my cosigner? It will be important to be frank with your cosigner when discussing your financial details and any concerns, so you should make sure you will be comfortable speaking with them.

Getting a cosigner is a big decision, so it’s important to carefully consider the pros and cons of a cosigner before asking someone to cosign a student loan refinancing with you. Understanding the whole situation will help you have a better relationship both with your cosigner and your student debt. If you do end up finding a cosigner that you are comfortable with who understands the risks and concerns, it may be beneficial and save you thousands over the life of your student loan!

At Snowball, we make the refinancing process more transparent and ensure you have evaluated the best lenders to get the best rate and terms for you. We also give you the best course of action to tackle your student debt and compare refinancing, optimizing payments, and federal decisions. Are you ready to optimize your student debt? Check out our student debt plan!