gift of cosigner release

The Gift of Co-Signer Release

Michael Lux Best Of, Blog, Student Loans 0 Comments

If you have private student loans, odds are you have a co-signer.  You may even have several co-signers.

Most people realize that co-signing any loan carries significant risk.  If the borrower doesn’t pay their bills, you get stuck with the bill.  For student loans, which can be in the hundreds of thousands, cosigning is a huge commitment.

A Bigger Risk

What many people don’t realize is that even if things go perfectly, co-signing is still a big burden on the co-signer.  It all comes down to credit reports.  Even if the borrower has not missed a single payment, that loan still shows up on the co-signers credit report.  Because so much of finance is automated these days, there is no room to explain the circumstances of the loan and the reliability of the borrower.  Bottom line, it can be devastating to the co-signers debt to income ratio.  Too much debt to not enough income and you may be denied for the loan or given a higher interest rate.

If you are sitting on student loans with a co-signer, consider trying to get your co-signer released.  The lenders have no incentive to make the process easy or simple, but it is a program that every lender should have.  Go through the steps to see if you qualify.  Its one of those things that is a bit of a pain, but a great way to say thank you to the individual who put themselves on the line for you.

Another Reason for Release

If the doing it for others approach is not motivation enough for you, consider the fact that it could very well be in your own interest.  As we reported when it was first revealed, the Consumer Financial Protection Bureau has uncovered numerous instances where a loan automatically defaults if the cosigner dies.  The lenders use this mechanism as an approach to go after money in the estate of the recently deceased co-signer.  The borrower, who may have never even missed a payment, is left with a defaulted loan on their credit report.

One Simple Email

If you are interested in finding out if you can get your co-signer released, just send the following email to your lender:

I am writing to you because I am seeking the release of my co-signer on my loan. Please conduct a review of my account to determine if I am eligible for co-signer release.

If you determine that I am not eligible to have my co-signer released from my loans, please provide an explanation, including the following:

  • What is your current co-signer release policy?
  • For what reason(s) am I ineligible for co-signer release?
  • If I am not eligible for co-signer release now, when will I become eligible?
  • What steps do I need to take to qualify for co-signer release?
  • Do you anticipate modifying these requirements in the future? Will any future modifications apply to me when I seek to release my co-signer?

If I am unable to exercise this option at this time, please update/annotate my account to reflect that I intend to seek co-signer release as soon as possible. Please contact me at the point-in-time at which I am eligible to have my co-signer released.

In addition, if you are unable to provide any of the information or documentation I have requested or otherwise cannot comply with this request, please provide an explanation.

Thank you for your cooperation.

This one simple email could save you and your co-signer a lot of grief.  With Mother’s Day this weekend and Father’s Day around the corner, it might be a decent gift.  Admittedly, it is not the most sentimental, but it is certainly something that will be appreciated.