How To Drop Your Co-Signer From Your Student Loan
According to information from the Consumer Finance Protection Bureau, more than 90 percent of student loans are now issued with a cosigner – up from 68 percent in 2008.
Lenders love cosigners, of course, because they provide substantial additional security for their loans – at next to no additional cost to them. Most of the time, lenders don’t have any incentive to release a co-signer. It’s all downside for them, with no upside for them whatsoever.
The main reason they will release a co-signer is to prevent you from refinancing. If you refinance, they lose you as a customer. And if you’re an on-time payer with good credit (and can qualify for refinancing at a lower rate), they don’t want to lose you as a customer.
There are only two sure-fire ways to release a co-signer from a student loan obligation: Pay off the loan in full, or refinance to another lender. But read this before you refinance a student loan.
Otherwise, if refinancing or paying off the loan entirely aren’t options at this point, read on to learn what it takes to get your student loan company or servicer to release your co-signer from the contract.
Start Preparing Now.
If you want to release your cosigner from your loan, or you’re a cosigner who wants to be released, you should learn the specific underwriting requirements of the individual lender and the terms of your contract. Each lender varies, but almost all of them require at least 1 to 3 years of consecutive on-time payments – among other requirements. The sooner you (or the primary borrower) gets serious about paying bills on time and cleaning up credit issues, the sooner you’ll be able to get a co-signer release from your student loan.
If you’re the primary borrower, you will need to show the lender that you are a creditworthy borrower on your own. You need to show that you have a track record of financial stability, you have a long history of making payments on time, and you have the income capacity to continue making these payments for the foreseeable future.
Lenders will invariably look very carefully at a number of issues:
- Your credit report (almost always your FICO score, though a few lenders, like SoFi, are beginning to explore alternative credit scoring services);
- Your employment status;
- Your income;
- Your debt-to-income ratio;
- Your payment history.
Most will also want proof that you successfully graduated the degree or program you were in when you borrowed the money.
First, be pro-active. If you’re the primary borrower, don’t expect lenders to notify you when may be eligible to apply for a co-signer release. They almost never do. First, they won’t know your credit history since you took out the loan, other than your payments on the loans they service. They also don’t know your income unless you tell them.
Check your credit.
Don’t wait until you actually submit an application for a co-signer release to check your credit. You need to know what’s on your credit report. You can get a free copy of your credit report from www.annualcreditreport.com.
Pull a report from each of the three bureaus, and inspect it for errors. See when the most recent 60 and 90-day delinquencies are. If they are listed in error, get them corrected before you apply for a cosigner release. If they’re accurate, that will tell you when the “clock starts ticking” for you to become competitive again for a cosigner release.
It’s important to clean up your credit report before you apply for a cosigner release because at least one student lender has a formal policy of disqualifying rejected applicants for a year before they can reapply. Others may have unwritten policies that they don’t disclose in public. Student loan companies aren’t exactly very transparent.
Criteria for Co-Signer Release
There is no single set criteria that will automatically lead to the successful approval of a co-signer release. Every lender is different – and they can be rather secretive about their specific internal credit underwriting standards. All of them will require you, the primary borrower, to be current on all your loans with them, and to have made consistent on-time payments for at least 1 to 3 years (and with some lenders, 4 years) immediately prior to applying for release.
Here are a few of the most prominent lenders and their published criteria.
Navient split from Sallie Mae some years ago, taking the portfolio of federally-guaranteed student loans with it (Sallie Mae kept the private loans on its books). Navient is the primary servicer of federally-backed student loans in the country.
One of the advantages of Navient is the relatively short 12-month minimum repayment period before a loan qualifies for a co-signer release. Most other lenders require 24, 36 or 48 months.
BUT… There’s a downside to Navient as well: In January 2017, the U.S. Consumer Financial Protection Bureau filed a lawsuit against Navient, in part over their refusal to release co-signers from student loans. The state attorneys general in Pennsylvania, Mississippi, and California also filed suit. Among the many complaints against Navient was the company’s failure to release accurate information about how to release a co-signer.
Also a subject of complaint was Navient’s practice of telling borrowers who prepaid part of their balances that they could skip upcoming payments. When borrowers took Navient’s customer service reps up on the offer, however, Navient would reset the consecutive payment requirement back to zero. They did not disclose this to borrowers at the time. So some borrowers were actually ahead of schedule with their payments but found themselves disqualified for cosigner release when they actually submitted an application.
The suits are still winding their way through the courts. We could very well see Navient wind up with a consent decree, forcing it to be more transparent and consistent about its co-signer release practices. But that’s going to take a while. In the meantime, borrowers and co-signers should consider getting a co-signer release on a Navient-serviced loan to be an uphill battle.
Nevertheless, it’s at least theoretically possible to get a release. According to Navient, in addition to having made the last 12 months’ worth of payments on time and in full, you must also meet the following criteria:
- You must be a U.S. Citizen.
- You must have made your last 12 consecutive scheduled principal and interest payments on time and in full.
- Your account must be current.
- You must submit proof of income.
- You must prove you completed your degree or certificate program.
Navient specifically asks for your current housing payment, car payments, and other regular monthly payments. However, they also require a credit check, so take care that your answers to these questions match what is reported on your consumer credit report. That’s another reason to check your credit report ahead of time: If there is a mismatch, you can expect a lot more scrutiny before you get an approval.
You can access Navient’s application form here.
Sallie Mae also has a short minimum consecutive on-time payment periods in the industry – just 12 months prior to submitting the release application.
Additionally, you must have had no student loan in a hardship forbearance or modified repayment program (including a Graduated Repayment Period) for the 12 months immediately preceding the request to release a cosigner.
You must be able to prove income and pass a credit check, with a report that shoes no open bankruptcies, foreclosures, student loans in default or 90-day delinquencies within the last 24 months.
Sallie Mae also requires proof of graduation or completion of the borrower’s degree or certification program. So co-signers have a vested interest in encouraging borrowers to stay in school. More details on the Sallie Mae web page, here.
Citizens Bank and Citizens One
Citizens Bank, and its lending subsidiary, Citizens One, will consider a cosigner release after 36 months of on-time payments.
- Borrowers who use deferment or forbearance will need to make 36 consecutive on-time payments after reentering repayment to qualify for release.
- Citizens One requires income verification and a full credit check on the primary borrower prior to releasing a co-signer.
- Have your ducks in a row before you apply. If you get denied at Citizens One, you may not reapply for a co-signer release again until at least one year has elapsed since your application. This obstacle underscores the need to check your own credit before applying, and to start preparing early for the co-signer release.
You can read more on Citizens One’s co-signer release requirements here.
College Ave will consider releasing a cosigner from a student loan once you meet the following criteria:
- Half the original scheduled payment period has elapsed.
- You have 24 consecutive months of on-time payments on all loans with College Ave.
- Your credit report shows no late payments on any other obligations for the last 24 months.
- Furthermore, the borrower must be able to prove income over the last two years of twice the balance outstanding on all loans with College Ave.
Discover does not release co-signers anymore, except for CitiAssist loans that Discover purchased. The company does not release co-signers on any loans approved after February 1st, 2012.
Other former CitiAssist private loans may qualify for cosigner release after between 24 and 48 months of consecutive on-time payments, depending on the date the loan was originally approved.
The borrower’s monthly gross income must be equal to or greater than $1,500.
You can find Discover’s cosigner release application here, along with a breakdown of consecutive monthly on-time payment requirements by type of loan and date of loan approval.
However, unless the loan was originally a CitiAssist loan, and approved before February 1st, 2012, Discover’s stated policies indicate that the only way you’ll be able to get a cosigner release is to refinance altogether.
DCU Credit Union Student Choice
DCU Credit Union will consider releasing a cosigner after 48 consecutive on-time loan payments. Additionally, the primary borrower will have to meet other credit underwriting criteria, including salary and favorable debt-to-income ratio requirements.
Many lenders advertise that a co-signer may be released from a private student loan after a certain number of consecutive, timely payments and a credit check to determine if you are eligible to repay the loan on your own. If your lender offers co-signer release, you will want to ask about this benefit and remove your co-signer as soon as you are eligible.–CFPB
Navy Federal Credit Union
Navy Federal will consider a co-signer release after 24 consecutive months of on-time payments for private student loans, with no periods of forbearance or deferment within that time frame. However, Navy Federal will consider a co-signer release on a consolidation loan after just 12 consecutive months of on-time, in full payments. For more details, see the Navy Federal website (scroll down to footnote 6).
In each case, the borrower must pass an income and credit check.
PNC Bank will consider cosigner release applications after 48 on-time monthly payments. There can be no periods of forbearance or deferment within the past 48 months. Additionally, borrowers must pass a credit check and provide proof of income.
SunTrust Bank is unusual in that in some circumstances, it will allow you to pre-pay your way to meeting their consecutive monthly on-time payment criteria for student loan release.
All Sun Trust’s newer loans require that you make your first 36 months’ of payments on time, without fail (within 10 calendar days of the due date). However, some of their older loans still in force have a 48-month requirement, so check your original agreement or call the bank to find out which category you’re in.
Alternatively, you may be able OR;
The loan has not had any late payments and has been prepaid prior to the end of the first 36 months of scheduled principal and interest payments. That is, if you make 30 months of payments on time, and then you pre-pay another 6 months of principal and interest, you may qualify for co-signer release.
A few additional stipulations:
- If the loan is in forbearance, a cosigner release may not be available.
- Borrowers seeking to get a co-signer released need to have a minimum credit score in the “upper 600s,” per company spokesperson Katie Lopez. There’s no specific debt-to-income ratio requirement, according to but it’s going to have to be reasonable in order to make the upper-600s FICO score threshold.
- Co-signer release is not contingent on degree completion, which is another factor that sets SunTrust apart.
- There’s no minimum salary requirement but the primary borrower has to be earning income on his or her own.
- There must have been no forbearances or modifications granted during the repayment period.
Wells Fargo will consider co-signer releases according to these criteria:
- The borrower is a U.S. citizen, U.S. National or permanent resident with proper evidence of eligibility.
- If the first payment was received on time, the borrower must have made the most recent 24 consecutive scheduled payments on time and in full.
- If the first payment was not received on time, then the consecutive on-time payment requirement extends to the most recent 48 scheduled payments.
- Wells Fargo defines an “on time” as paid within the grace period, with no late charges assessed.
- Additionally, there must have been no hardship forbearances granted during the consecutive monthly payment periods.
As usual, borrowers can expect to undergo a credit check and an employment and income evaluation. The co-signer also needs to sign a consent form.
Note: If you have an active Wells Fargo student loan applied for prior to May 18, 2015, your first 24 consecutive scheduled payments being made on time and in full will also meet the on-time payment requirement.
Jason Van Steenwyk is an experienced financial industry reporter and writer. He is a former staff reporter for Mutual Funds, and has been published in SeekingAlpha, Nasdaq.com, NerdWallet, Value Penguin, RealEstate.com, WealthManagement.com, Senior Market Advisor, Life and Health Pro and many other outlets over the past two decades. He is also an avid fiddle player and guitarist. He lives in Orlando, Florida.