Dec
04
2013

Being removed as a cosigner from children’s student loans

Graduates in Cap and Gown

 

Dear Experian,

I co-signed college loans for my children. They are now both out of school, working and re-paying the student loans on time with no delinquencies. I would like to remove my name as co-signer. Will this increase my credit score, and will it decrease their credit scores?

- PBK

 

Dear PBK,

When you agreed to co-sign the loans, you agreed to share full responsibility for repayment of the debt. The lenders would have to agree to change the contracts to remove that responsibility, but they are unlikely to do so. A more probable solution would be for your children to refinance the loans independently.

The first thing your children will need to do is contact potential lenders and find out whether they qualify to refinance the loans based solely on their individual credit, income and other assets.

If the lenders agree, the current loan accounts would be closed and new accounts would be opened in your children’s names only. Essentially, the old loans would be paid by the new loans and your association with the debts would be removed.

Once refinanced, the original loans will still appear on your credit report as part of your credit history. However, they will be updated to show that they are now paid and have a zero balance. Having the loans paid could increase your credit scores because the amount of debt that you owe will decrease, but would not likely cause a significant increase.

The old loans will also be reported as paid on your children’s credit reports with a status showing they have been paid. The new loans will be added showing the open, active debt.

Repaying the new loans on time and as agreed will continue to help your children build positive credit histories, which will be reflected in credit scores that improve over time.

Thanks for asking.

The “Ask Experian” team

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