Remove co-signer from private student loan

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

Dear Carol,
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.

Get more news, money-saving tips and expert advice by signing up for a free Bankrate newsletter.

Ask the adviser

To ask a question of Dr. Don, go to the “Ask the Experts” page and select one of these topics: “Financing a home,” “Saving & Investing” or “Money.” Read more Dr. Don columns for additional personal finance advice.

Bankrate’s content, including the guidance of its advice-and-expert columns and this website, is intended only to assist you with financial decisions. The content is broad in scope and does not consider your personal financial situation. Bankrate recommends that you seek the advice of advisers who are fully aware of your individual circumstances before making any final decisions or implementing any financial strategy. Please remember that your use of this website is governed by Bankrate’s Terms of Use.