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Refinancing Your Student Loans With a Cosigner

Refinancing Your Student Loans With a Cosigner
Rebecca Safier
Rebecca SafierUpdated August 12, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Refinancing your student loans can lead to better rates and terms on your education debt. But if you don’t have good credit, it’s tough to qualify for a lender’s best rates. That’s where a cosigner comes in. By applying with a creditworthy cosigner, you can boost your chances of qualifying for the lowest rates. Adding a cosigner can also help you get approved if you can’t meet a lender’s criteria on your own. However, there are both pros and cons to refinancing student loans with a cosigner, which are worth reviewing before you sign on to share debt. And the new federal student loan forgiveness program announced by President Biden can impact your situation as well. Let’s take a closer look at refinancing student debt with a cosigner, including both the advantages and potential disadvantages.

The New Student Loan Forgiveness Plan

If you earn less than $125,000 a year ($250,000 for married couples) you may be eligible for up to $10,000 in forgiveness on your federal student loans under the new federal forgiveness plan. Pell Grant recipients may qualify for an additional $10,000 in debt cancellation. Additionally, the payment pause for federal student loans has been extended until December 31, 2022.It’s important to note, however, that if you refinance a federal student loan with a private lender—using a cosigner or not—the loan will not qualify for federal forgiveness plans. One option you might want to consider is to get the forgiveness on your federal loan first and then refinance the remaining debt afterward.

Can You Refinance Your Student Loan With a Cosigner?

Many lenders give you the option of student loan refinancing with a cosigner. When you apply with a cosigner, you’ll both provide your personal and financial information on the refinancing application. If your cosigner has a good credit score and positive credit history, they could help your chances of qualifying or even get you better rates. Some refinancing lenders that let you apply with a cosigner include SoFi, Laurel Road, and Citizens Bank. Not all refinancing lenders permit this option, however. Earnest, for instance, does not allow cosigners on student loan refinancing applications at this time. Some lenders also offer the option of releasing your cosigner after a certain period of on-time payments, typically a year or more. Cosigner release can remove your cosigner from the loan, but it’s not automatic. You’ll need to apply and be approved. 

Pros of Refinancing Student Loans With a Cosigner

Adding a cosigner to your student loan refinancing application can be beneficial if you can’t meet a lender’s underwriting requirements on your own. Most lenders require good credit and a stable source of income to refinance student loans. Basically, they look at your financial situation to make sure you’re likely to pay back your loan in full and on time. If you don’t have good credit — or don’t have much of a credit history — it could be hard to qualify for student loan refinancing. Or even if you do qualify, you might only be offered high rates that won’t save you much money in the long run. Adding a creditworthy cosigner could unlock the door to student loan refinancing and potentially get you more competitive rates. A lender will be reassured by the addition of a creditworthy cosigner and make you a better offer as a result. 

Cons of Refinancing Student Loans With a Cosigner

First of all, refinancing a federal student loan with a private lender means you will lose eligibility to forgiveness and other government relief programs, as previously noted.There are both pros and cons of refinancing with a cosigner. While adding a cosigner to your refinancing application could benefit you, it might not be so advantageous to your cosigner. For one thing, your cosigner becomes just as responsible for the debt as you are. If you miss payments, a debt collector could call your cosigner and demand that they pay. Plus, their credit will get damaged if you miss payments or your loan goes into default. Cosigning on debt will also increase their debt-to-income ratio. A high DTI ratio could make it harder for your cosigner to take out additional loans, whether they want to borrow a mortgage, business loan, or student loan for your sibling. If your cosigner has no plans to open a loan or new credit card in the future, this may not be an issue. And if you make consistent, on-time payments on your refinanced student loan, this could actually help your and your cosigner’s credit. But it’s important to keep in mind that missing payments on your student loans will hurt the both of you. Before asking someone to cosign, make sure you’re both on the same page about what cosigning means and who’s responsible for paying off the student loan. By clarifying expectations upfront, you can avoid hurting your cosigner’s finances or straining the relationship.

Do You Have to Have a Cosigner to Refinance Student Loans?

You’re not required to have a cosigner to refinance your student loans. If you can meet a lender’s criteria for credit and income on your own, you can refinance the student loans in your own name. In fact, you might decide it’s not worth refinancing your student loans with a cosigner and would instead prefer to refinance solo so you can assume full responsibility for your debt. Some students refinance parent loans in their own name, for instance, to take the burden off their parents. What’s more, some refinancing lenders don’t allow you to apply with a cosigner. They require that you qualify on your own merits, or you can’t refinance at all. 

How to Find a Cosigner

Say you know you want to do a student loan refinance with a cosigner. Who should it be?A cosigner should be a trusted adult with decent credit and a source of income, but they don’t necessarily have to be related to you. Your cosigner could be a parent or guardian, but they could also be a trusted friend or a spouse. That said, your cosigner will need to meet other lender requirements, such as being the age of majority in their state (typically 18) and holding a valid Social Security number or tax identification number. The exact requirements will vary by lender, but they will apply both to you as the primary borrower and any cosigner you add to your application. 

The Takeaway

Applying to refinance student loans with a cosigner could unlock the door to better rates and terms. Adding a cosigner can also help you qualify in the first place if your credit isn’t up to scratch.However, asking someone to cosign on debt is a big ask. Not only will the loan show up on their credit history, but your cosigner will be considered equally responsible for paying back the debt. If your loans fall into default, a collections agency could pursue payments from your cosigner. Before you go all in with a cosigner, therefore, it’s a good idea to have a clear conversation about all the pros and cons. Plus, make sure you’re both on the same page about who’s responsible for paying back the loan and how they will afford payments. Once you’re ready to move forward, take some time to shop around with multiple refinancing lenders to find your best rates. Lantern by SoFi can help you with refinancing student loans by showing you offers with no impact on your credit score.* 
Photo credit: iStock/SouthWorks
The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.LCSL0322020

Frequently Asked Questions

Do I need a cosigner to refinance student loans?
Does refinancing affect the cosigner?
How can a cosigner get out of a student loan?

About the Author

Rebecca Safier

Rebecca Safier

Rebecca Safier has nearly a decade of experience writing about personal finance. Formerly a senior writer with LendingTree and Student Loan Hero, she specializes in student loans, financial aid, and personal loans. She is certified as a student loan counselor with the National Association of Certified Credit Counselors (NACCC).
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