Joseph Reinke CFA
I hope you enjoy reading this blog post.

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Joseph Reinke, CFA
I hope you enjoy reading this blog post

If you want our team + technology to help with your finances, click here.

Refinancing Student Loans With A Co-Signer

  • FitBUX
  • |
  • Refinancing Student Loans With A Co-Signer

There are two primary reasons for refinancing student loans with a co-signer.  In this article we discuss both in more details and share a few other pointers.

Table of Contents

  1. Reason 1: Qualifying
  2. Reason 2: Interest Rate
  3. When Will A Co-Signer Make A Difference?
  4. Co-Signer Release Option

Reason #1: Qualifying

The first reason for refinancing student loans with a co-signer is to qualify if you have tried to refinance on your own and were declined.

However, before adding a co-signer you may have be declined because of a mistake.  The three application mistakes we see most often are:

Note: If you need help with the above, you can use FitBUX’s free student loan refinance service.

If you exhausted these options, then adding a co-signer may give the student loan refinance company the comfort to give you the loan.  However, your co-signer will now be liable for the loan.  There is information you need to know about the liability element which we discuss a little later on.

FitBUX Student Loan Refinance Give Away

Reason #2: Interest Rate

The second reason for refinancing student loans with a co-signer is to get a lower interest rate.  For instance, if you just graduated and have a limited credit history, you may not get a great rate with a lender that relies heavily on credit data when making an approval decision.

However, if you add a co-signer, such as a parent, with a well-established (and good!) credit history, you will be considered less “risky” by the lender. Therefore, you may be able to get a lower rate.

The “quality” of the co-signer matters greatly. We discuss these characteristics below.

When Will A Co-Signer Make A Difference?

As previously mentioned, each student loan refinance company is a little different.  However, there are two general rules:

  • Your co-signer’s credit score needs to be higher than yours,
  • Your co-signer’s annual gross income should be higher than yours.

If your co-signer is retired, they will have to show significant retirement income for them to help you on the loan.

These are the general rules of when a co-signer will help. The reason they are rules is that student loan refinance companies will only look at one applicant for qualifications, you or your co-signer. They will not take combined incomes into consideration.

The two companies that make an exception to this is Splash Financial and Laurel Road.  They a special spousal co-signer option. Using this option will allow you to use combined income on your application if you are married and use your spouse as a co-signer.

Co-signer Release Option

There are scenarios where co-signers are worried about being liable for a loan.  Therefore, some refinance companies have added a co-signer release option to make things easier.

The co-signer release is a stated number of months of on-time payments. Once you satisfy that time period, you can apply to have the co-signer released from the liability. For example, a 36 month co-signer release means once you make 36 on-time payments you can apply to have your co-signer release from the liability.

This option varies for each student loan refinance company. Some may not offer it at all.  If you are thinking of using a co-signer, be sure to check our student loan refinance company reviews to see if they offer this.

Also, be sure to inform your co-signer of this option. I’ve seen a lot of parents say no to co-signing because they didn’t want the liability. However, once they found out about the release they were willing to co-sign.

By Joseph Reinke, CFA, Founder of FitBUX

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