If you're in the market for a private student loan (the kind you turn to once you've exhausted all your scholarships, grants, and federal funding), you've likely heard or will hear about cosigners. Having a cosigner can make a difference on your student loan eligibility and interest rate, so I wanted to take some time to talk about cosigners and answer your questions.
Here are a few of the basics to spark some conversation:
What exactly is a cosigner?
For private student loans a cosigner is someone who signs a loan with the student. The cosigner agrees to be responsible for the loan, along with the student. A cosigner is a person who takes on equal liability of a student loan. That means the cosigner is on the hook for any payment that the primary borrower doesn't make.
Why do I need a cosigner?
Many college students don't have an established credit history, so a cosigner is required to secure the funds. This makes the loan less of a risk for the lender. Even if a student has an established credit history, it may still be a good idea to apply with a cosigner. Why? Most private loans have tiered pricing. That means the interest rate is figured at a base rate (like Prime Rate 
or LIBOR ) plus a margin. For private student loans, that margin is based on credit. So bringing on a cosigner with excellent credit can improve the terms of a borrower's loan.
Who should I get to cosign for me?
There isn't a standard person that must cosign a borrower's loan. In fact, by law lenders can't tell you who should cosign your loan. Some common choices are family members like parents or grandparents. However, you can choose a non-relative, too. As long as the person has established credit and is willing, he or she can cosign. One thing is for sure though: No matter who you choose to cosign your loan, it's important that you have a cosigner in mind at the beginning of the process, as it will help the lender in providing you with a more timely credit decision.
Will my cosigner be liable for my loan for the whole repayment period?
Not necessarily. Some lenders offer an incentive that gives borrowers the option to release their cosigner from the liability. This cosigner release is usually an option if the borrower proves that he or she is able to repay the loan. Many lenders ask borrowers to make a certain number of on-time payments before they can take on sole responsibility of the loan. Lenders may also require the borrower to meet certain credit guidelines at the time their cosigner is released.
Now, what else are you curious about when it comes to cosigning a loan or finding someone to cosign your loan? Here's the place to ask.
what if somebody used you as a cosigner and you want out. how long does it take to remove a cosigner from the loan?
Anonymous, the option to release your cosigner varies from lender to lender. You'd need to check with yours to see what they require.
While the release is an option for some borrowers, cosigners shouldn't count on this when they agree to cosign. That agreement means taking on equal liability during the whole life of the loan.
Should Equifax report fact that my wife is not delinquent on loans and that her daughter is the one on the student loan with wife as a cosignor and daughter was late in making payments with no notification to co signor by either party.
FICO score for wife went from 740 to 660 and one credit card has reduced her credit limit to $100 although wife had always paid total balance monthly for almost 3 years
pgsenior -- Your wife would need to refer back to the terms of the credit agreement. If she agreed to be equally liable for her daughter's loan, the way it was reported would be correct. Since her daughter is not letting her know when she's unable to make payments, your wife should see what options are available to view the statements through the lender. Some possibilities could be having the statement delivered to your address, or if possible gaining access to see the account online. You may also want to check with the lender to see what attempts were made to contact your wife and her daughter for payment. As soon as the account went delinquent there should have been notices. If Wells Fargo is the lender, go ahead and contact us through our Ask The Expert tool and we can look into the situation further.
What happens if the co-signer of a studen loan dies? Is the deceased person's estate then responsible?
I should probably make my first comment clearer...if the co-signer is actually making the payments, and then dies, and no payments get made...can the lending agency go to the deceased co-signer's estate for payment or can they insist on immediate payment since the co-signer is now deceased?
Linda -- If the cosigner would pass away, the borrower needs to inform the lender. Then, generally, the lender would file a claim against the cosigner's estate, provided there is one (This happens no matter which party was making the payments on the loan). Any funds recovered would be applied to the balance of the student loan account. The primary borrower would then be responsible for the remaining balance of the loan. If the cosigner was making the payments on the loan and the primary borrower did not begin making the required payments upon the cosigner's death, the loan would go past due and the lender would start the collections process with the primary borrower. Also, the borrower would not be required to find someone to take over the cosigner responsibility and would instead be solely liable for the rest of the loan.
what are the requirements of the cosigner? as in does the cosigner need to have good credit? or can they have bad credit? i am trying to find a co signer and i am having no luck. all say they have no credit. i need this loan so badly to make it thru the summer and get a house. So what exactly is required of a cosigner? i am making no money as i am student and they say i meet all requirements on loan i just need a co signer.
crystal -- You'll want someone with good credit to cosign your loan. A cosigner agrees to take on equal liability for the loan, so they need to meet all the requirements laid out by the lender. This could include things like their credit score, income, etc. By getting a cosigner with excellent credit, you may find that the terms of your loan are better. This is because when the lender determines the terms of your loan they'll consider both your credit and the credit of your cosigner. One other thing I want to mention is that you need to make sure that you're using the loan for approved education-related expenses. The credit agreement (promissory note) should detail what expenses you can cover with your student loan.
i have agirl who is 18 and will co sign but i am not sure if she will qualify. she is not working right now but is looking and has good credit. would she be ok to co sign? so are you telling me that housing is not approved for a student loan? when i talked to the lady on the phone i told her it was for getting a house and she said it was fine.
crystal -- You'll want to find a cosigner with a current income. Here are some things that make a good cosigner: 4-5 years of good credit history; steady employment with enough income to meet their debt obligations; all credit obligations are met; credit is not overextended; no serious derogatory items on their credit bureau report. As far as your house goes, it depends on what you mean by "get a house." If you're enrolled in school and need money for your living expenses, then covering rent on a house with a student loan is approved. However, if you were not enrolled in school and were trying to use a student loan to buy a house, that would not be approved. Does that make sense? So, it depends on your situation.
Can a person who cosigned a student loan contact the bank and asked to be removed from the loan. The check has been sent to the student but uncahsed at the time this happened. The cosigner did not contact the student but sent a letter to the bank. The bank has contacted the student and asked him to attempt to find another cosigner. This puts the student in a hard position as he is already at school. Can the cosigner do this? Your prompt response(s) will be appreciated. He needs an answer.
Sharon, the policy may depend on the lender. Technically if the loan was disbursed, but the check hadn't been cashed the bank could have stopped payment on the check at the request of the cosigner. It's very odd that the cosigner would go through the process to get the loan, signing documents, etc. to request to be removed from the loan at the last minute. Has the student been able to talk with the cosigner about the situation? If the loan is with Wells Fargo, please let us know so we can check into the specifics of the situation.
NEVER, NEVER, NEVER, COSIGN. The release process is a fraud. It will not happen, and no lender will show you real information on the percentage of people who comply are released!!!!
Hi there – I wanted to give you a few more details about cosigner release options. As I mentioned in the post, the borrower will need to meet certain credit guidelines when they request to have the cosigner removed from the loan. I just wrote another post that deals with why cosigners may be needed and what borrowers should be talking about with their potential cosigners that may be helpful for this post’s readers, since cosigning should be carefully considered: http://blog.wellsfargo.com/StudentLoanDown/2009/08/the_cosigner_conundrum.html. Since cosigners are brought on to meet the credit guidelines, to remove them requires that the borrower can meet the necessary guidelines on their own. For some borrowers, they may not be able to qualify right after they’ve made the required amount of payments. However, borrowers can ask their lender why they didn’t qualify. If the denial reason is resolved over time, borrowers can make additional requests to have their cosigner released.
I co-signed a student loan for a friend who had a bankruptcy on his record that was about to be removed. Almost three years have elapsed from the time the loan was disbursed until now. He has made all of the payments on time from the time he received the loan. Now I now want to be removed as the co-signer. We tried to get my name removed in January, but the loan company said he had insufficient credit. I was also told that since he was self employed that might also make things more difficult since he wasn't steadily working. What would he need to do to get my name removed from the loan now? How much money would he need to make? How would he need to improve his credit? How else can we prove that he is able to take on the loan by himself?
What are the requirements that need to be met by the primary borrower in order for the co-signer to be removed from a student loan. I know this varies from institution to institution, but can you give me a general sense. How long does the primary borrower need to be working in a steady job? Does it matter how much they make in the steady job? What are the credit requirements?
Jason – The exact qualifications will depend on the lender. Is the loan with Wells Fargo? Lenders may consider a borrower’s credit history, credit score, debt-to-income ratio, and employment stability among other things when evaluating whether the cosigner can be released. Has your friend gotten a recent credit report to know what he needs to be working on to improve his credit?
Melissa D. – Jason had a similar question right before you. As you know, it will vary from lender to lender, but may include credit history, credit score and debt-to-income ratio among other things. So, yes, the amount of money the borrower makes may be a factor as it could be considered in relation to the amount of debt the borrower has. A good cosigner is someone who: has good credit history, has steady employment with enough income to meet their debt obligations, meets all credit obligations, has not overextended his/her credit, and has no serious derogatory items on their credit bureau report. To have the loan without a cosigner much of the same is usually expected of the primary borrower.