Refinancing¹ your student loans has the potential to save you in interest over the life of your loan. But sometimes you can feel ready to refinance, get all your documents together, fill out the application…and discover that you just don’t qualify. That can feel deflating at first, but rest assured: it’s very normal, especially for new graduates. 

Student loan refinancing takes place through private lenders, which means you’ll need to meet certain underwriting criteria to be eligible. And if you’re still in school, a recent graduate, or you have bad credit, you may not have a strong enough credit history to do it on your own. That’s where a cosigner can come in. Refinancing with a cosigner can not only make you eligible in the first place—it can also help you unlock better terms and rates than you could on your own. Many lenders offer this option, including Earnest. Refinancing with a cosigner could give you access to better terms and lower rates, and it might help you get approved if you don’t have a strong credit score. 

Here’s what you need to know about refinancing with a cosigner and how to decide if it’s for you:

Student loan refinancing key takeaways

• If you refinance student loans with a cosigner, you may get a lower interest rate and save money over time²

• You can refinance your loans again in the future to perform a cosigner release

• There are other ways to simplify your monthly payments or lower your bills without a cosigner

• If you’ve been asked to be a cosigner, you should seriously consider the responsibility before agreeing

• You can refinance with a cosigner at Earnest. The process is the same as our standard refinancing application and you could get a better interest rate if your cosigner has good credit and meets the eligibility requirements. 

What is a cosigner and why would I want one?

A cosigner is someone who legally agrees to pay your loans on your behalf if you can’t pay your debt for any reason. Cosigners with good credit make a loan less risky for the lender because they can provide extra assurance that the loan will be repaid in full according to the loan terms at the time of disbursement.

If you’re currently in school pursuing a bachelor’s degree and you have private student debt, there’s a good chance you already have a cosigner. While you don’t need a cosigner for federal student loans, it’s rare for young students to qualify for private loans without the help of someone with a well-established credit history.

If you’re a recent graduate with minimal credit history or you have bad credit, a cosigner can help you get approved for a loan you may not be able to get on your own. Having a cosigner can also help you secure a lower rate.

Who can be a cosigner?

Most people ask their parents or legal guardians to cosign their student loan debt, but you can ask virtually anyone with a good credit score who trusts you and with whom you have a good relationship. Anyone over the age of 18 who is a legal resident of the U.S. is eligible.

Cosigning a loan is a binding legal agreement and it can potentially put pressure on a relationship while the loan balance is outstanding. For that reason, it’s important to think carefully about who you’re asking, why you’ve chosen them, and whether you’re comfortable with the potential changes this may have on your relationship.

What makes a good cosigner?

A good cosigner is a trusted adult with whom you have a solid relationship. You should be comfortable opening up to this person about your finances, and you should be confident that they’ll work with you on any issues that could arise further down the line. Ideally, a cosigner should also be someone with excellent credit. That way, you’ll get the maximum benefit from piggybacking off their financial history. The higher your cosigner’s credit score, the more likely you are to qualify for a lender’s lowest rates.  

Refinancing student loans with a cosigner: How does it work?

Refinancing your private or federal student loans for a lower rate can save you hundreds or thousands of dollars over the life of your loan. However, it’s not for everyone, and now may not be the right time for you. Here’s what you need to know before you really dig into the process.

Consider your loan type 

First, consider the type of loans you have. Before you refinance loans from the federal government, you should be aware that doing so will require giving up certain benefits and flexible repayment options that can help protect you and your credit score over time. For example, federal loan borrowers have access to income-driven repayment plans that can lower their monthly payments during periods when they’re earning less money.

The federal government also offers student loan forgiveness programs for people in certain public service careers. These programs can eliminate a borrower’s remaining debt after sufficient qualifying on-time payments are made.

Determine whether it’s the right time to refinance your loans

If you have a solid income and a cosigner who can help you qualify for significantly lower interest rates, now could still be a good time to refinance. That’s especially true if you have private loans and market interest rates have dropped since you first took out those loans. In that case, refinancing could help you qualify for a much lower interest rate than you currently have. 

If, however, market rates have risen since you originated your loans, it might be best to wait until rates are lower before you refinance. 

Determine whether you need a cosigner

First, check your rates through Earnest’s online rate-checker tool. (This process takes just minutes and involves a soft credit check, which won’t affect your credit score.) If you decide that you could get a better rate with a cosigner, you can start the application and invite your cosigner. They’ll get an email notifying them that you’ve asked them to cosign your refinance.  

Both you and your cosigner will need to fill out a refinancing loan application before Earnest will perform a hard credit check. Once that application process is complete, Earnest will make an official interest rate offer, which you can either accept or decline.  

Identify a cosigner and ask them for help

Agreeing to cosign a loan is a serious commitment that neither you nor your cosigner should take lightly.

If you become unable to make your payments for any reason, that can seriously impact your cosigner’s credit report, and in turn, their ability to borrow money for a new home, refinance their own loans, or qualify for credit cards. If you stop making payments, your cosigner may be forced to step in to make payments for you. Aside from seriously impacting their life and finances, this can also put a strain on your relationship.

You should only ask for help from a cosigner if you’re certain you’ll be able to make payments as planned. You should already have a strong relationship with the person you’re asking, and ideally they’ll be in a very comfortable financial position so that having cosigned your loans won’t cause them stress. Typically, this person should also be a U.S. citizen or permanent resident.

Prove you’re financially responsible

You should be prepared to explain to your cosigner exactly how you plan to pay off your student debt. You’ll have the best chance for success if you can show that you’re financially responsible, that you’ve considered how serious the agreement is, and that you know how you’ll pay off the balance.

You can start by making a thorough and realistic budget for yourself that shows you’ve thought through how you’ll make your payments. Show proof of income by sharing salary details about your new job or a recent pay stub that shows your take-home pay. Explain how you’ll make room in your budget to build up your emergency savings so that you won’t get derailed from paying back your loans in the event of an unexpected expense.

Be prepared to get a no. The person you ask may decline for reasons they may not be willing or able to discuss with you, such as financial obligations or insecurity of other family members, or a bad experience in the past that has nothing to do with you.

What to do if you can’t find a cosigner

If you can’t find someone willing to cosign, consider spending the next year working to build up your credit so you can try to refinance on your own in the future. You may be able to improve your credit score over just a few months by applying for a credit card or small personal loan from a local credit union and continuing to make on-time payments for the loans you do have.

Choose a lender and submit your loan application

Once your cosigner is onboard and you have everything else you need to proceed with the loan application process, research the best student loans for your circumstances. Aside from finding the lowest rates available to you, consider that the company you choose will be with you for a long time, likely 5 to 10 years, and possibly even longer.

Be mindful about choosing a payment you can afford. You never want to put yourself in a position where you expect it will be difficult to make your payments, as going into delinquency or default—when you aren’t able to meet your obligations to your lender—can have a serious impact on your credit score.

Make your first payment—and then keep making them

It’s critical to make on-time payments to your lender. It’s particularly important to do so when your payments could affect someone else’s financial situation, too. You may find it helpful to sign up for automatic payments to make sure you never miss one. Some private student loan lenders offer borrowers interest rate discounts in exchange for signing up for autopay³ (Earnest, for example, offers a 0.25% autopay discount just for enrolling). So, this can help you save money over time, too.

Does Earnest let you refinance with a cosigner? 

Yes! You can apply to refinance your student loans on your own or with a cosigner. The application process, features, and benefits are exactly the same as our standard refinancing process. As a borrower, if you partner with a cosigner who has good credit, you might qualify for a lower interest rate than if you applied independently. Applying with a cosigner could also increase your chances of approval if your application has been denied in the past. 

Here’s how it works: 

• Start with a rate check. You’ll see your potential interest rate and start the application. 

• You’ll have two options: apply on your own or with a cosigner. Select ‘Apply with a cosigner’ to start your part of the application. 

• After you enter info such as your address, name, and student loans, you’ll be able to invite your cosigner and they can complete their part of the application. 

• Once you submit the application, both you and the cosigner will go through a hard credit pull and will see your final rate offer and move to select your loan terms, rates, and payment.  

Earnest allows you to play around with monthly payments and loan terms until you find an amount and length that works for you. Generally speaking, the shorter the loan term, the higher your monthly payment will be. That said, short loan terms also come with lower interest rates. And the lower the interest rate, the more money you save over the life of the loan.

As a cosigner, can I refinance on behalf of the student? 

Generally speaking, you cannot. Only the primary borrower (usually the student/former student) can refinance the student loans, even if they are refinancing with a cosigner.  

Pros and cons of refinancing with a cosigner

Refinancing loans with a cosigner can save you money, but it isn’t for everyone. Here are the basic pros and cons to help you figure out which way to go.

Pros of refinancing with a cosigner

• You may gain access to lower interest rates, saving you money over time

• Having someone invested in your debt repayment plan may help keep you on track and could help you learn better personal finance management

• Refinancing may help you get away from a lender or loan servicer you don’t like working with, and the assistance of a cosigner may help you do that if you can’t do it on your own

Cons of refinancing with a cosigner

• Cosigning is a serious financial responsibility and this could put a strain on your relationship with the cosigner

• If your loan enters forbearance or deferment, or goes into default because you can’t pay, you could seriously damage your cosigner’s credit

Cosigner refinancing FAQs

Refinancing loans is a big decision, and so is choosing to cosign one. Here are a few more questions you may be wondering about as you weigh the options available to you.

Can I refinance student loans that have a cosigner?

Yes. You can refinance a loan regardless of whether it is cosigned, as long as you meet eligibility requirements for the new loan. Refinancing can be useful for multiple reasons.

For starters, if some time has passed since the disbursement of your loan and you have reduced your debt-to-income ratio and/or built up your creditworthiness in other ways, you may be able to refinance without the help of a cosigner. This effectively releases them from the responsibility of your loan.

You may also want to refinance—with or without your cosigner—to move from a fixed-rate loan to a variable-interest-rate loan, or vice versa. You can often get variable-rate loans more inexpensively than fixed-rate loans, though it’s a bit of a gamble; variable rates go up and down as national interest rates change, so your rate could always increase in the future. Fixed rates, however, stay the same for the life of the loan, regardless of how market interest rates change.

You can also refinance any time national interest rates drop if you’d like to try to secure an even lower rate. Earnest allows borrowers in good standing to apply for a refinance after four months of consecutive on-time payments. Word to the wise: Each refinanced loan is treated as a brand-new loan, so it’s important to remember that it will require a hard credit check, which may affect your credit score temporarily.

Can I refinance my student loans without a cosigner?

If you can’t find a creditworthy adult to cosign for you, you may be able to refinance your loans without a cosigner. Your eligibility for such a refinance depends largely on your credit. Some lenders—like Earnest—consider other factors, like your current employment and work history, which may make it easier for you to get approved without a cosigner. However, even with these considerations, it’s often difficult for new graduates to prove sufficient creditworthiness to get very low interest rates on their own.

That said, if you’re determined to refinance and to do it without a cosigner, you may try applying for a smaller loan amount. Generally speaking, the more money you want to borrow, the harder it is to get approved. You may be able to save money in the long term by refinancing your loans slowly, a bit at a time, while you improve your credit score along the way. You may find that lenders are more willing to offer you better rates as your credit history deepens and your score increases. This will take some time and research but it may pay off.

If you only want to refinance federal loans, student loan consolidation is also an option. Anyone with federal loans can consolidate them without the help of a cosigner. Unlike refinancing, consolidating loans will not lower your interest rate or the total amount you pay over the life of the loan. Instead, you will get a new interest rate that’s a weighted average of your existing ones. 

Consolidation can, however, simplify your payments. It allows you to bundle your current federal loans into a single monthly bill. This can be particularly useful if you have federal loans issued by multiple student loan servicers, i.e. the companies managing your federal education loans. No matter how many servicers you currently have, you will only have one after you consolidate. Note: While your parents can consolidate their Parent PLUS Loans with their own federal education loans, they cannot consolidate their PLUS Loans with any of the loans you’ve taken out in your own name.  

Does refinancing affect cosigners?

Cosigners are legally liable for any new loans they cosign. So, if they cosign your refinanced loan, they’ll be responsible for it, just as they were on any private loans they cosigned in the past. But if you’re able to refinance your loan without a cosigner, refinancing will free them from their obligation.

If a borrower misses a payment or makes a late payment on a refinanced loan, this can affect the cosigner’s credit score negatively. So, if you find yourself unable to make payments, it’s important to contact your cosigner right away to let them know and come up with a plan. 

You may also be able to get in touch with your lender to discuss what your options are to prevent the loan from going into default. Earnest, for example, offers borrowers in good standing the option to request to skip a payment once a year⁴ in the event they’re unable to pay for any reason. 

Can cosigners refinance student loans?

Cosigners can refinance their own loans—that is, any loan for which they are the primary borrower. However, they cannot initiate a refinance on the loan they’ve cosigned. Only the “owner” of that loan—the primary borrower—can do so.

Can I be removed as a cosigner on a student loan?

Some private lenders allow cosigners to be removed from loans through a process called a cosigner release. Often, borrowers must be able to prove they’re able to pay off the student loan debt in full on their own accord. This process can be tricky. For that reason, many lenders—including Earnest—do not provide a cosigner-release option. However, you may be able to refinance your cosigned loans without a cosigner once your financial situation improves. Because a refinance loan counts as a brand-new loan with new terms, that process effectively releases the cosigner from their obligation.

How do I know if I should cosign a loan?

Even if you fully trust the person asking you to cosign their loans, you should be aware that there’s always a risk you’ll become fully responsible for the loan if the primary borrower can’t pay. You may not want to cosign a loan if you can’t comfortably take on the full amount of the monthly payments in the event of an emergency. Before agreeing, you should ask the borrower to demonstrate their ability to pay and to show that they’ve fully thought out what will happen in the worst-case scenario.

Find out how much you could save with Earnest

Refinancing student loans with Earnest could save over the life of your loan. And with the ability to apply to refinance again with Earnest after four months of consecutive on-time payments, there’s a good chance you’ll be able to release your cosigner sooner than expected.

Earnest never charges origination fees or prepayment penalties. We also let you skip a payment once per month for free. Try our student loan refinancing calculator to see how much you could save. It only takes a couple of minutes and won’t hurt your credit score.

This blog post provides personal finance educational information, and it is not intended to provide legal, financial, or tax advice.

¹ Please note that you may lose benefits associated with your underlying federal loans, such as federal Income-driven Repayment Plans (an example of which is the SAVE plan), Economic Hardship Deferment, Public Service Loan Forgiveness, or other deferment and forbearance options, if you refinance into a private loan. If you file for bankruptcy, you may still be required to pay back this loan.

² Choosing to refinance to a longer term may lower your monthly payment, but increase the amount of interest you may pay. Choosing to refinance to a shorter term may increase your monthly payment, but lower the amount of interest you may pay. Review your loan documentation for the total cost of your refinanced loan.

³ You can take advantage of the Auto Pay interest rate reduction by setting up and maintaining active and automatic ACH withdrawal of your loan payment from a checking or savings account. The interest rate reduction for Auto Pay will be available only while your loan is enrolled in Auto Pay. Interest rate incentives for utilizing Auto Pay may not be combined with certain private student loan repayment programs that also offer an interest rate reduction. For multi-party loans, only one party may enroll in Auto Pay.

⁴ Earnest clients may skip a payment through a one, one-month forbearance during a 12 month period. Your first request to skip a pay can be made once you’ve made at least 6 months of consecutive on-time full principal and interest payments, and your loan is in good standing. The interest accrued during the skipped month will result in an increase in your remaining minimum payment. The final payoff date on your loan will be extended by the length of the skipped payment periods. Any unpaid accrued interest may capitalize (added to the principal balance) at the end of the forbearance period by adding unpaid accrued interest to the outstanding principal as permitted by law and the terms of the loan agreement.

Interest will not be capitalized on loans originated to Michigan residents under the Regulatory Loan Act of 1963. Please be aware that a skipped payment does count toward the forbearance limits. Please note that skipping a payment is not guaranteed and is at Earnest's discretion. Your monthly payment and total loan cost may increase as a result of postponing your payment and extending your term.