Student loan refinancing involves consolidating your existing student loans into a new loan. Many borrowers choose to refinance to try to get a lower interest rate, save money over the long term, make repayment more manageable, or pay off loans faster.
As you research potential lenders and their refinancing requirements, you also might come across information about adding a cosigner to your loan. Applying for a student loan refinance with a cosigner could make sense in some cases. Here’s how cosigning works, plus a few instances where working with a cosigner might be the right move.
Adding a Cosigner When Student Loan Refinancing: Is It Worth It?
Before you refinance with a cosigner, it’s important to understand how cosigning works and the potential risks. A cosigner on a loan is someone who legally agrees to pay back a loan if the primary borrower can’t. Your lender will assess their credit and financials in addition to yours when determining approval.
Potential Risks to Consider
While using a cosigner has its benefits for borrowers, it’s not without risks for the cosigner. Here are a few risks to consider before applying for student loan refinance with a cosigner:
- Payment Responsibility: One of the most important details to understand is that if you’re unable to make payments, your cosigner will be responsible for them.
- Impact on Credit: In addition to showing up on your credit reports, your new loan will also appear on your cosigner’s credit reports. This can impact both yours and your cosigner’s credit scores and debt-to-income ratios, which play a role in qualifying for future loans, such as a car loan or mortgage.
- Limited Control: If you’re wondering, “Can a cosigner refinance a student loan?” the answer is no. Lenders typically won’t allow cosigners to refinance the student loan debt, meaning your cosigner will have less control over the debt.
When Refinancing With a Cosigner Makes Sense
1. You can’t qualify on your own
Qualification requirements for student loan refinancing are generally similar across different lenders, though the nitty-gritty details could vary slightly. For instance, one lender might require a higher minimum credit score than another.
Qualification requirements can include things such as:
- Minimum credit score
- Minimum debt-to-income ratio
- Current employment
- Established credit history
Working with a cosigner for student loan refinancing could make sense if you don’t have strong credit or your debt burden is high compared to your income. It could be especially helpful if you were denied a student loan refinance in the past due to your credit or a high debt-to-income ratio.
Applying for a new loan with a cosigner who has good credit could increase your chances of approval. Just ensure potential co-applicants are aware of the responsibilities of cosigning a loan before you apply.
2. You want more student loan refinancing options
Maybe you meet a few lenders’ borrowing requirements, but not many. For example, some lenders will accept a 650 credit score, while others require a 680 credit score or higher. If your selection of lenders is limited due to your credit or another reason, you might be forced to accept a loan with a higher interest rate in order to qualify for refinancing.
Adding a cosigner who meets many lenders’ requirements could give you more student loan refinancing options. Thus, you’ll be able to choose the lender offering a lower interest rate, potentially saving you money over the life of your loan.
3. You want to save as much money as possible
Just because you meet a lender’s requirements doesn’t mean you’ll qualify for their lowest student loan refinance interest rate. Lenders determine your rate based on many of the eligibility factors listed above, such as credit score, credit history, debt-to-income ratio, and employment history.
There’s often a range of rates for specific term lengths. Borrowers with better credit and lower debt-to-income ratios typically receive the lowest rates.
Prequalifying for a loan can give you insight into your potential rate. When you prequalify, you submit some basic information to the lender, then they typically conduct a soft credit pull to determine your estimated rate.
If you prequalify and your rate is higher than expected, adding a cosigner with a stronger credit, a better debt-to-income ratio, or established employment history might help you qualify for a lower rate. Contact your lender for more information if you’re wondering whether adding a cosigner for a refinance could help reduce your rate.
How Much Can Adding a Cosigner Save You?
So, how much money could adding a cosigner save on a student loan refinance? It depends on your specific circumstances, but here are some hypothetical scenarios.
Let’s say this is your current loan:
| Balance | $50,000 |
| Remaining term | 15 years |
| Rate | 7.25% |
| Current monthly payment | $456 |
| Total to be paid over loan term | $82,080 |
If you opt to refinance, here’s what your monthly payments and total paid over your loan term could look like with different rates, assuming your loan balance and term don’t change.
In this scenario, your chosen lender offers a 4% to 6% rate range, and you prequalify for a 6% rate independently and a 4% rate with a cosigner.
| Rate | Monthly Payment | Total Paid Over Loan Term |
| 6% | $422 | $75,947 |
| 4% | $370 | $66,572 |
Both your monthly and total payments will be lower with a lower rate, but the 4% rate will save you $86 per month versus just $34 with a 6% rate. The most significant difference is how much you’ll save over time — $15,508 with a 4% rate versus $6,133 with a 6% rate.
While this scenario is hypothetical, it shows how adding a cosigner could save you money both on a monthly basis and over the life of your loan. The monthly savings might even make you consider switching to a shorter term to pay off your debt faster. A student loan refinancing calculator can offer more insight into potential savings.
The Bottom Line
Adding a cosigner when refinancing student loans could help you meet minimum requirements to refinance, give you more loan options, or reduce your interest rate to save money over your loan’s term.
ELFI offers some of the lowest student loan refinancing rates available and assigns every customer a dedicated loan advisor to help with every step of the process and answer questions — including if adding a cosigner will be beneficial.
If you’re interested in refinancing your student loans, check out the ELFI Student Loan Refinancing Calculator to see what you could save. You can also prequalify with ELFI in just minutes without affecting your credit score.
