Can I Refinance a Student Loan as a Cosigner? Probably Not, But You Do Have Options

Being on the hook for someone else’s student loans can quickly become stressful and complicated. When you originally cosigned for student debt that wasn’t your own, you likely wanted to help open the doors to higher education for a loved one. But once it came time to enter the repayment phase, the arrangement may have blown up in your face.

If the primary borrower is having issues with repaying the loan, you may be wondering if you can refinance a student loan as the cosigner.

The idea of refinancing the loan into your own name might give you a sense of control over the situation. Unfortunately, refinancing a student loan as a cosigner isn’t the industry norm. But it doesn’t mean you’re left without options.

Let’s explore some of the reasons why a cosigner might want to refinance a student loan. And some viable strategies that can help solve the problem.

Common stressors for student loan cosigners

The decision to become a cosigner is usually done with good intentions and in good faith. But sometimes, cosigners don’t understand the responsibility of what they’re agreeing to.

As a cosigner, you’re guaranteeing the loan will be paid if the primary borrower fails to fulfill their end of the agreement. You’re 100% liable for the unpaid balance and accrued interest on the loan. And this obligation can last decades until the loan is paid in full.

Whether you cosigned for a family member, a close friend or a partner, there are a multitude of scenarios that might make you want to refinance the debt into your own name, such as:

• You’re concerned the primary borrower won’t repay the debt.
• You’ve already taken over payments and want a better interest rate.
• Your credit score has taken a hit due to nonpayment.
• The student loan is causing personal strains on your relationship with the borrower.
• You no longer have a relationship with the borrower.

Whatever the reason, you might feel emotionally and financially trapped as a cosigner. But there are some ways you can regain control of the situation.

Can I refinance a student loan as a cosigner?

Here’s the bad news. Even though you’re legally responsible for repaying the student debt as a cosigner, you don’t technically own the loan obligation. In most cases, you won’t be able to refinance a student loan that isn’t already in your own name.

But there might be rare instances when a lender might let you refinance even though the loan isn’t in your name. For example, you might have a better chance of refinancing a loan as a cosigner if the primary borrower is or was your spouse. Or you might get lucky if you’ve already assumed responsibility for the loan after the primary borrower failed to make payments for an extended period of time.

These are outlier cases though. Most likely, you’ll need to explore other options that require actions from the primary borrower.

4 alternatives to refinancing for cosigners

Now for the good news. Just because you can’t refinance as a cosigner doesn’t mean you can’t find a mutually beneficial solution for both you and the primary borrower. Here are four strategies to help you navigate this difficult situation.

1. Convince the primary borrower to initiate a refinance

Ask the borrower to refinance the student loan themselves. Walk the borrower through the benefits of refinancing.

Show them how much they could save each month by scoring a lower interest rate. And how much they’ll save in interest over the life of the loan. Seeing these numbers is often motivation enough to explore refinancing offers.

If the borrower has a steady income and decent credit score, they might qualify to refinance on their own. If not, you’ll need to decide whether you’re willing to cosign the new loan again or bow out and leave the primary borrower to find another cosigner. The primary borrower may be able to refinance with a new cosigner too.

2. Apply for a cosigner release

Many lenders offer cosigner releases after a set number of on-time payments are made by the primary borrower. With a cosigner release, your name is fully removed from the loan once the borrower proves they can responsibly repay their loan.

The primary borrower has to apply for the cosigner release and meet certain income and credit requirements. Depending on the lender, it may require several years of consecutive payments to qualify. For example, some lender's cosigner release can be applied for after graduation and 24 months of full payment. Sallie Mae’s cosigner release, by comparison, requires only 12 months of payments.

3. Help get the borrower’s finances in order

As the cosigner of a student loan, your financial standing is at jeopardy if the borrower misses payments and eventually defaults on the loan, so it’s best to nip any potential payment problems in the bud.

Most people don’t have a natural knack for managing money. Sit down with the borrower and discuss the best plan of action for managing their student loans. Keep track of payments and take action if any repayment issues arise.

Most importantly, keep an open line of communication with the borrower. These are tough conversations to have, but the more you talk about finances, the more comfortable each party will become.

4. Pay off the loan in full

Although paying off the loan might not sound like the ideal scenario, sometimes you could benefit more from paying a lump sum to get rid of a cosigned debt hanging over your head.

If you have access to savings, you might avoid further financial turmoil by paying off the outstanding balance in full. You can make personal arrangements with the borrower to repay you on the side, if possible. Either way, take it as a lesson learned for future financial decisions.

Cosigners have options

You might need to mix and match strategies to find a solution that works for your situation. For example, let’s say you don’t have a cosigner release option with the current lender and there’s no way the primary borrower would qualify for a refinance on their own.

You could agree to cosign on a new refinancing loan with a lender that does offer a cosigner release, allowing the primary borrower to save on interest and opening up a path to get your name off the loan after an established period of time.

Navigating a cosigning situation can be awkward and cause strain on your relationship with the borrower. But you can minimize the negatives of being a cosigner by openly communicating with each other and tackling the issue together.

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