Dear Dr. Don,
Can you remove a co-signer from a student-parent loan? The student has graduated from college and has been gainfully employed for the last two years. Do they refinance?
— Carol Collegiate
Out of school and gainfully employed in this economy is a beautiful thing. I will assume the student loan is a private student loan because it’s that type of loan that typically requires a co-signer versus a federal student loan.
The options for the co-signer on a private student loan will vary by lender. For example, Sallie Mae, the company that specializes in student financing, allows borrowers to qualify for a co-signer release if certain conditions are met, such as a demonstrated payment history over one or two years, depending on the loan program, and the student achieving age-of-majority status or otherwise meeting the lender’s underwriting standards.
Refinancing a private student loan typically isn’t practical. Consolidating private student loans is possible, with the potential for a lower interest rate, a single monthly payment and the potential extension of the loan term. Extending the loan term may result in higher total interest expense, even with the reduced interest rate. A consolidation loan could remove the co-signer if the borrower was able to qualify based on just his or her credit score.
In general, private student loans aren’t eligible for consolidation with a student’s federal student loans. That keeps students with these loans from capturing the lower federal rates.
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