Managing Student Loans

The majority of undergraduate students who need to take out private student loans to cover costs towards their college education have no established credit history of their own. As such they present as an unknown risk to the financial institutes who grant the loans, yet at the same time they are customers that are wanted for the future. Thus co-signers are usually required to stand as guarantors for the student loan.

In order to be a co-signer you need to have a good credit history, which in some cases rules out a students parents acting as guarantors, in which case the student may well approach someone else. Parents are the obvious co-signers but anyone who is willing can stand in as a guarantor providing they have a good credit history.

However, becoming a co-signer requires great trust in the student to responsibly pay their loan back after graduation, as the student loan can impact on their own credit score. They could even become liable for the repayments, as agree to take equal responsibility for the payments as the student.

Thus whilst many are willing to step in and co-sign a student loan to enable the student to work towards their degree, there may well be a reluctance to stay as a guarantor once the student is working and responsible for the payments. The banks are selling the advantages to co-signers by stating it will most likely enable the student to obtain a lower interest rate, and thus reduce the total cost of borrowing, but nothing can detract from the weight of responsibility the co-signer takes on.

Whilst the student has many things to consider when selecting a private loan lender the potential co-signer may well have the length of their obligation to the loan as a primary consideration.

Here is a list of the most popular providers of student loans and the release terms they offer to the co-signer. Take into consideration that the term ‘may’ is not definitive, and thus ‘may not apply’. The release dates shown are only offered if the loan has had all the payments met, both principal and interest by the student, for consecutive months in the stipulated span. If payments are late or missed the co-signer will find that the terms no longer apply.

Wells Fargo: Terms of co-signer release not published.

US Bank: Terms of co-signer release not published.

Sallie Mae: The borrower may apply for co-signer release after 12 months.

Fifty Third Bank: The borrower may apply for co-signer release after 12 months.

Commerce Bank: The borrower may apply for co-signer release after 12 months.

Citi Bank: Co-signer released after 24 months

Charter One: Co-signer released after 36 months.

Chase: Co-signer released after 36 months.

Citizens Bank: Co-signer released after 36 months.

Sun Trust: Co-signer releases after 48 months.

It is recommended that the potential co-signer asks the individual institutions which state ‘may apply’ what percentage of co-signers are released if the terms of the loan are adhered to by the student. The terms of release for the co-signer should definitely be taken into consideration, especially for anyone worried about the length of time they will be associated with the loan, and thus reducing their own available credit.