Can You Transfer Student Loans From Cosigner to Borrower?

Many students use a co-signer on loans when they enter college. Students are often not earning a salary, have little to no credit history and otherwise will not qualify for loans on their own. Once the student graduates, however, he is likely to be in a much better position to qualify for a loan without a co-signer. In this case, it is possible to modify or refinance a student loan into the borrower's name only.

Process

You cannot simply "remove" a co-signer on most loans. The lender used the co-signer's credit and income as part of the consideration for loan terms. If the co-signer is removed, the borrower's credit and income will be used to consider new terms. Contact your lender to ask about modifying the loan to a single borrower. You may be able to do so directly by filling out a few forms. Or you may need to go through the loan approval process again to remove the co-signer.

Considerations

If you have a federal student loan, you can modify or refinance through the U.S. Department of Education. You will need to apply for modification without the co-signer. At this time, you will be able to consolidate all of your federal student loans into one loan, remove the cosigner and move forward with a more simply loan structure. You cannot consolidate private loans into federal loans.

Options

When you transfer a student loan away from a co-signer, you have an opportunity to refinance or change the terms of the loan at the same time. Consider the loan payment structure. Are you able to meet the payments on schedule? Is the interest rate acceptable in the current market? Is there another lender who may offer a better quote? Take this opportunity to shop around to determine if you are getting the best deal possible on your sole-borrower loan.

Warnings

When you remove the co-signer from your loan, you are standing on your own feet. On one hand, it is a great way to build your personal credit for the future. On the other, if your credit is low at this point, you may face unfavorable loan terms. It is advisable to wait until you understand your credit, income and financial responsibilities post-graduation before refinancing your loan without a co-signer. If you default on your student loans you will be starting off on the wrong foot financially in your adult life.