How a Co-Signer Can Help With Student Loan Refinancing

Refinancing student loans can lower monthly payments or get a lower interest rate. According to NerdWallet, this happens when a private lender pays off current student loans and replaces them with a new loan with different terms.

Lenders look at an applicant's credit history and income when deciding whether to approve a loan. Many borrowers add a co-signer to help with approval. A co-signer is a person who agrees to share legal responsibility for repaying the loan.

Co-signers are common among approved borrowers. The Rhode Island Student Loan Authority reported to NerdWallet that 70% of its approved refinancing borrowers have co-signers. College Ave said 51% of its approved borrowers had a co-signer.

A co-signer matters most when the borrower's credit score is fair or low. If a borrower's credit score is already in the mid-700s, the rate improvement from a co-signer is likely too minor to justify it. Borrowers with a history of bankruptcy may have more luck getting approval with a co-signer. International and DACA students may be required to have a U.S. citizen co-signer to be eligible for some refinance lenders.

A co-signer can later be removed from the loan through co-signer release. This removes the co-signer from legal responsibility for the loan. To qualify, borrowers typically need to make a set number of consecutive, on-time payments, often between 12 and 48. Each lender sets its own requirements. For example, a 48-month waiting period is required for co-signer release when refinancing with Yrefy. SoFi does not offer co-signer release on refinanced loans.

Late or missed payments on a co-signed loan can show up on the co-signer's credit reports. Co-signing also affects the co-signer's debt-to-income ratio, which is an important factor for mortgage applications. If the primary borrower dies, the loan may be discharged, depending on the lender and loan terms.