When Do You Need a Cosigner for Your Student Loans?

05/29/2015 04:47 pm ET | Updated May 29, 2016

When browsing your student loan options, you may notice that there are student loans without cosigners and with. Before signing up your parents or your great aunt, make sure you fully understand the significance of using a cosigner on your loan. There are certainly many benefits to take advantage of when apply for a student loan with a cosigner, but there is also added responsibility to make sure you repay the loan on time and in full. Read on to learn more about when you might need a cosigner and what exactly that means.

What is a Cosigner?

A cosigner takes on equal responsibility for repaying the student loan as the primary borrower does, and is equally affected by any missed payments. Because the cosigner’s credit is directly linked to the loan, it is important to have a strong, positive relationship with your cosigner, such as a parent or close relative. However, there is no relationship requirement as long as he or she has strong credit and a reliable employment history. If you are unable to repay your loan, the cosigner essentially agrees to take on payments on your behalf, so make sure you and your cosigner share a mutual trust.

Student Loans With Cosigner

Generally speaking, only private student loans require a cosigner in certain situations, while federal loans do not. If you lack a substantial credit history when applying for private loans or have delinquent payments in your past, you will most likely need a cosigner. However, you can benefit from several perks when using a cosigner. Because your cosigner backs up the loan repayment on your behalf, you often receive easier loan approval and better interest rates compared to applying without a cosigner. The stronger the borrowing profile (i.e. higher credit and income) of your cosigner then the higher the likelihood of a stronger interest rate. Using a cosigner also allows you to build (or rebuild) your credit history, assuming you make your payments on time.

Student Loans Without Cosigner

Federal student loans generally do not require a cosigner, however the FAFSA application to receive federal aid may require a parent if you are a dependent. Federal aid is open to anyone regardless of your financial or credit history. Federal rates are one size fits all, so all those who qualify for aid will get the same interest rate on the same type of loan.

How to Remove a Cosigner from Your Loan

You can plan to remove your cosigner on a schedule by signing a cosigner release, which generally lasts anywhere between 12 and 48 months from the start of your loan, depending on the lender. The release generally comes with certain requirements, like consecutive payments and an income minimum. If you did not sign a release form when getting your loan, you can always refinance your loan later to remove the cosigner. Just like the scheduled release, you’ll need good credit and a steady income to remove the cosigner.

Visit Credible to find the best student loan refinance options to remove a cosigner from your student loan.