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Get schooled on student loan consolidation rights

Dr. Don Taylor, Ph.D., CFA, CFP, CASL
Don Taylor
Don Taylor

Dear Dr. Don,
I am a co-signer on several student loans for a primary borrower. Is it possible for me to consolidate the loans since the primary signer has not taken that step? My sense is that this would be much more convenient for me. Any information you could provide would be much appreciated.

My sister's only income is Social Security benefits, and she is nearly bankrupt. She has struggled to make the loan payments each month. Is there any way my poor sister can get out of this mess?

-- Robert Restructure

Dear Robert,
In a word, the answer is "no."

You are responsible for making loan payments if the primary borrower does not. You do not, however, have control on the issue of consolidating them into one loan.

It's most common for private student loans to require a co-signer. While federal Plus loans may require co-signers, federal student loans don't generally require co-signers.

It's much harder to find a willing lender to consolidate private student loans. The credit standards required to consolidate can make it difficult for the primary borrower to consolidate without a co-signer.

If the loans are in repayment, and the primary borrower has remained current on payments for a predetermined number of months, you might be able to petition the lender to be removed as co-signer. Unfortunately, that petition typically has to be initiated by the primary borrower.

For many Sallie Mae student loans, to qualify for a co-signer release, the primary borrower must be a U.S. citizen or permanent resident, make 12 consecutive and on-time principal and interest payments, and meet the underwriting requirements when the release request is processed. Other lenders' co-signer release terms may require a longer payment history.

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