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Cosigning and Refinancing

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Refinance Student Loans with Cosigner

Cosigning should be approached as a way to save money on interest costs with someone who understands the responsibilities of cosigning a loan. The purpose of having a cosigner should be to maximize your savings and lower your interest rate  not to get something you don’t need or can’t afford. Read on to learn more about the different options for having and releasing a cosigner.

Refinancing with a spouse

PenFed can refinance spouses’ student loans together to get all of the loans on one rate and term. When refinancing loans with your spouse, PenFed uses the higher of the two credit scores to get you the best available rate for your loans. When you refinance, the loans will also be consolidated into a single monthly payment. Get started by using the Find My Rate tool to see what you can save by refinancing.

Traditional Cosigner

There are two main reasons to refinance with a cosigner. First, refinancing with a cosigner can lower your interest rate if they have a higher credit score than your own. Second, a cosigner can allow you to qualify for a loan if your income or credit score doesn’t meet the minimum requirement. If you have a credit score between 670 and 699, then you will need a cosigner with a credit score of 720 or higher to be eligible. Also, if your income is between $25,000 and $41,999, then you will need a cosigner with annual income greater than $42,000 ($50,000 if the loan amount is between $150,001 and $300,000). We’ve provided income guidelines to help you with this step.  In addition, you can use the Find My Rate tool and input the cosigner’s credit score to see what they can save you by cosigning.

If there is a small difference in interest rates between applying with a cosigner or without, having a loan on your own is the best approach in the long run. When you are looking to make a larger purchase, such as a house, this is good indication to lenders that you have taken care of paying back the money you borrowed.

Cosigner Risk

Cosigners need to be aware that their credit score can be negatively affected if you don’t make timely payments. A cosigner is guaranteeing that if you cannot make the payments, they will. If your cosigner is a parent, this is typically not an issue as they know the risk and are willing to take it on to save their child money. Make sure you assess the risk before agreeing to be a cosigner on a loan or asking someone to cosign for you.

Cosigner Release Options

If you have a cosigner on your existing loan and are interested in refinancing, check PenFed’s eligibility requirements to see if you can qualify on your own. If you do, you can apply on your own, which would release the existing cosigner on your current loans.

For PenFed borrowers who have a cosigner on their loan and want to assume full responsibility, the cosigner release policy requires 12 months of consecutive, timely payments. If you wish to release your cosigner, there’s no need to reapply – just check the eligibility requirements and contact PenFed directly. Make sure to check your credit to see if you qualify for the same rate and term. If not, it may be best to keep your cosigner until you have a higher credit score.

What refinancing can do

Both federal and private loans can be refinanced together to get every loan on the same rate and repayment term. PenFed offers 5, 8, 12 and 15-year terms. Currently, the most popular option is refinancing the standard 10-year term to an 8-year term. Shortening your term by 2 years will allow you to get out of debt faster at a lower cost while keeping your monthly payments manageable.

Remember, you don’t have to refinance all of your loans. For example, if you have private loans at a great rate – keep those but consider refinancing your high interest rate federal loans. If you work in public service and are enrolled in the federal forgiveness program, keep your federal loans and refinance your private loans. Review what you owe to decide which loans are best for you to refinance. Once you refinance a federal loan, you will forego federal benefits. We have no limit to the number of loans you can refinance but do have a min and max balance of $7,500 – $300,000.

Explore your refinancing options and find what works for you. If you have questions about cosigning or refinancing, let us know.