Today, we filed a report detailing complaints about default practices in the private student loan industry, where borrowers default even when their credit is good, and we remind consumers that they can avoid unexpected defaults by monitoring their co-signer’s releases.
Today, most private student loans have a co-signer (usually a parent or grandparent). Having a co-signer can usually lower your interest rate, which will save you money in the long run because the co-signer will have to pay back the loan if you default.
However, your loan may contain clauses that allow the student loan provider to default on your payments — even if you make your payments on time.
This is because your co-signer is also on your loan and any change in their behavior will affect your loan and cause it to be terminated and your entire balance must be paid immediately. We have received complaints that private student loan providers have defaulted on their borrowers when their co-signer died or filed for bankruptcy.
Removing a co-signer
If you are a co-signer, or you have a joint student loan with a co-signer and are making payments, you should see a “co-signer discharge.” You should consider this option to avoid an unexpected default. Both the borrower and the co-signer can benefit from getting a discharge.
Many lenders claim that private student loans can be forgiven if the co-signer meets a series of requirements for regular, on-time payments and performs a credit check to determine if you qualify to repay the loan on your own. If your lender offers a co-signer forgiveness, you’ll need to apply for this benefit and remove your co-signer as soon as you qualify.
Unfortunately, many student loan servicers will not tell you when you are eligible to discharge your co-signer’s debt, so you should ask how to do this.
To help you get started, we’ve put together sample letters that you can edit and send to your student loan servicer. You can download the sample letter and send it by mail, or you can cut and paste the text below when you log into your account on the service provider’s website and click “Send Message” or “Contact Us.”
I need more information on how to release my co-signer
I am writing to you because I wish to release my loan guarantor. Please review my account to determine if I qualify to release my loan guarantor.
If you determine that I am ineligible to discharge my co-signer’s loan, please provide an explanation, including the following.
What is your current co-signer release policy?
Why am I not eligible to remove a co-signer?
If I do not qualify for a co-signer waiver, when will I qualify?
What steps do I need to take to qualify for a co-signer waiver?
Do you expect to improve these requirements in the future? Will there be future updates on when I would like to be released as a co-signer? If this option is not currently available to me, please update/clarify my account to reflect my intention to seek release as soon as possible. Please contact me when I am eligible to be released as a co-signer.
In addition, if you are unable to provide any information or documentation that I request or are otherwise unable to comply with such a request, please provide an explanation.
Thank you for your cooperation.
I am a co-signer and I wish to be released
I am writing to request a waiver of any obligation to repay any loans associated with this account. Please review this account and determine if I qualify for a waiver.
If you determine that I am ineligible, please provide an explanation, including:
Why am I not eligible to remove a co-signer?
What steps do I need to take to qualify for a co-signer waiver?
What is your current co-signer release policy?
Do you expect to improve these requirements in the future? Will there be future updates on when I can opt out of this obligation? If this option is not currently available to me, please update/clarify this account or accounts to reflect that I would like to do so as soon as possible. Please contact me when I am eligible to be released as a co-signer.
In addition, if you are unable to provide any information or documentation that I request or are otherwise unable to comply with such a request, please provide an explanation.
Thank you for your cooperation.
We also have other sample letters you can send to student loan debt collectors to provide payment instructions.
Remember, if you have a problem with your student loans, you can file a complaint online or call us at (855) 411-2372.
If you have questions about paying off your student loans, visit our Student Loan Repayment Guide to learn how to tackle your student loan debt.
Rohit Chopra is the CFPB’s Student Loan Ombudsman. To learn more about the work we do on behalf of students and young Americans, visit consumerfinance.gov/students .
