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It’s possible to roll student loans into a mortgage using a cash-out refinance. In order to to do this, you’ll already need to have enough equity in your home. While this could potentially help you secure a lower interest rate, it’s not the right choice for everyone. Read on for more information on situations when it may make sense to roll your student loan into a mortgage and other strategies to pay off student loan debt.

Paying Your Student Loans

Paying off one loan with another is a standard form of debt reshuffling or consolidation. When it comes to student loans, though, your options may seem limited. It is, however, possible to roll student loan debt into a new mortgage through a cash-out refinance loan — as long as you have sufficient equity in your home.

But just because you can, it doesn’t mean you should. Here are some tips on how to consolidate student loans into a mortgage — and whether it may be the right move for you.

Rolling Student Loans Into a Mortgage

A cash-out refinance is a type of mortgage loan that enables you to turn a portion of your home’s equity into cash. Simply refinance your existing mortgage for more than what you currently owe into a new loan with new terms and keep the difference.

Once you have the cash in hand, and as long as there are no loan conditions to pay off specific debt with the cashout, you can do whatever you want with it, including paying off your student loans.

You may need to do the legwork of determining how much you need to add to the new proposed loan and may be responsible for ordering the final payoff. If it is not a condition of the new mortgage loan, the lender would normally not request escrow to order the payoff and pay the loan in full at loan closing. If you would like escrow to perform this service for you, just let them know.

Once you’ve completed the loan consolidation process, you may still have the same amount of debt as you did before (possibly more if you added any applicable closing costs to your new loan). You’ll just be paying it all in one monthly payment, based on your new mortgage terms.

If you want to refinance student loans into a mortgage, it could be beneficial in some situations. However, it’s important to understand the benefits and drawbacks of doing so and also to compare the benefits of this option with other alternatives.

One such drawback is that you may no longer be eligible for federal student loan benefits , such as the ability to pursue federal student loan forgiveness or federal student loan repayment plans. This includes income-driven repayment plans, where your monthly student loan repayment changes according to your income.

Pros and Cons of Rolling Student Loans into a Mortgage

Depending on your debt situation and your credit profile, consolidating student loans and your mortgage into new terms could be a smart idea or a terrible one. Here are some of the pros and cons to consider.

Pros of Rolling Student Loans into Mortgage

•   It could lower your interest rate: If you pay a higher interest rate on your student loans and current mortgage vs. a new Cash-Out Refi, consolidating may help reduce how much you pay in overall interest.

•   It could lower your monthly payment: If you qualify for a lower interest rate and choose a longer repayment period with the new loan, it may significantly lower the total amount you pay each month for your mortgage and student loans combined. Keep in mind that extending the life of the loan may mean you pay more in interest in the long-term.

•   It simplifies your finances: Having a single monthly payment might make your finances easier to manage. The fewer monthly payments you have to keep track of, the better. If you have multiple student loans, rolling them into your mortgage can make your life easier.

Cons of Rolling Student Loans into Mortgage

•   You could end up paying more interest over time: Stretching a 10-year student loan repayment term to up to 30 years could end up costing you more in interest, even if the interest rate is lower. Also, if you have paid down a 30 year mortgage for a few years and originate a new 30 year mortgage, you will be extending your existing loan term and may be paying additional interest over the life of the loan.

•   You may not be eligible: To qualify for a cash-out refinance loan, you typically need to have at least 20% equity left over after the new loan amount on the cash-out refinance. Even if you do have more than 20% equity right now, the difference might not be enough to pay your student loan in full.

•   You may pay closing costs: Depending upon the rate and term you choose, you may have applicable closing costs. FannieMae offers a program for student loan cash-out refinance loans. Consider getting a quote for this program and compare the rate and fees of this program to a standard cash-out refi.

•   You may be reducing the amount of available equity in your home: Taking cash out of your home can reduce the amount of available equity in your home. Market value fluctuations can also impact the amount of available equity.

3 Alternatives to Rolling Student Loans into a Mortgage

Before you seriously consider consolidating student loans into a mortgage, it’s important to know what other options you may have for paying down your debt faster.

1. Refinancing Your Student Loans

Whether you have federal or private student loans, you can refinance your student loans with a private lender like SoFi. Depending on your credit, income, and financial profile, you may qualify for a lower interest rate, monthly payment, or both.

You can also gain some flexibility by choosing a longer or shorter repayment term. Keep in mind that refinancing federal student loans means they’ll no longer be eligible for any federal programs or borrower protections, such as income-driven repayment plans.

2. Seeking Repayment Assistance

Employers are increasingly offering student loan repayment assistance as an employee benefit. Well-known companies that provide this repayment benefit include Aetna, Fidelity, PricewaterhouseCoopers, SoFi, and more. If your current employer doesn’t offer student loan repayment assistance, consider finding a job that does when you are next seeking employment.

3. Apply for Student Loan Forgiveness or Grants

Depending on your career path, you may qualify for student loan forgiveness or grant programs. Examples of these programs include (but are not limited to):

•   Health care

•   Veterinary medicine

•   Law

•   Military

•   STEM

If you’re working in one of these fields or a similar one, check to see if there are forgiveness or grant programs for which you may qualify. As previously mentioned, a cash-out refi may make you ineligible to participate in these programs. Check on any possible loss of benefits before considering a refinance of these loans.

Deciding If Rolling Student Loans into a Mortgage Is Right for You

Using a cash-out refinance to consolidate student loans and a mortgage into one affordable monthly payment sounds appealing, especially if you can get a lower interest rate than what you’re currently paying. But it’s crucial to consider all of the costs involved before you make a decision.

A lower interest rate, for instance, doesn’t necessarily mean you’ll pay less interest over the life of the loan. Work with a mortgage loan officer or run an amortization schedule in order to do the math.

Also, keep closing costs in mind. Closing costs can vary depending upon the loan scenario and is tied to factors such as the interest rate you choose, your credit score, loan type, property type, and more.

And paying closing costs is not a given. For instance, you can choose to take a higher interest rate (if it is still lower than what you currently have) and use the lender rebate money built into that higher rate to cover some or all of your applicable closing costs. When the time comes to lock in your rate, speak with your chosen lender about various loan programs and the estimated closing costs tied to each rate and term option.

Finally, take a look at some of the other options out there and determine whether you could potentially save more money in interest with them. The more time you spend researching, the better your chances of settling on the option that is most affordable overall.

Can You Buy a House With Student Loans?

While existing debt can impact whether you’re approved for a loan, or the interest rate and loan terms if you are approved, it’s still possible to buy a house with student loan debt. When you apply for a mortgage, the lender will review your complete financial picture including your debt obligations, which might include student loans, credit card debt, or a car loan.

Debt-to-income ratio is one important consideration for lenders. This is a measurement of how much debt one has in comparison to how much money you earn and lenders rely on this metric to inform whether or not you’d be able to make the monthly payments on a new loan, considering your existing debt. Generally speaking, lenders are unlikely to approve anyone for a mortgage with a debt-to-income ratio higher than 43%, though lenders may be more inclined to lend to someone with a debt-to-income ratio lower at or less than 36%.

Beyond debt-to-income ratio, lenders will also evaluate factors such as the borrower’s credit score.

Before applying, do some number crunching to see what a mortgage might cost and how it will impact your overall debt-to-income ratio. This might be helpful in understanding the mortgage rates you may be eligible for.

In addition to traditional home loans there are programs available for first-time home buyers that might make buying a home with student loan debt more achievable.

Refinancing Student Loans With SoFi

If you are interested in consolidating your student loan debt at a lower interest rate but don’t want to roll them into your mortgage, you may instead want to consider student loan refinancing. With SoFi student loan refinancing, you can refinance your private or federal loans (or both!) with no application fees, origination fees, or prepayment penalties. And you still get the benefit of consolidating your loans to one payment, with a new (and potentially better) interest rate and loan terms. Keep in mind that refinancing any federal loans will eliminate them from federal programs and borrower protections such as income-driven repayment plans or deferment options.

The Takeaway

When paying down student loan debt faster, there’s no one-size-fits-all solution. The more information you gather about your options, the easier it will be to eliminate your debt as quickly as possible.

If you’re interested in refinancing your student loans, consider SoFi. Student loan refinancing at SoFi has no fees and as a SoFi member, borrowers qualify for perks such as career coaching, community events, and more.

FAQ

Is it a good idea to roll your student loans into a mortgage?

Evaluate all loan details carefully before rolling your student loans into a mortgage. Factors such as closing costs, loan term, any additional fees, and interest rate can all influence how much it will cost to borrow money over the life of a loan. In some cases, it may be possible to qualify for a lower interest rate when borrowing a mortgage. In other cases, extending the repayment of your student loans over a 30-year period with your mortgage may make it more expensive. If you have any questions on your personal financial situation, consider speaking with a qualified financial professional or mortgage loan officer who can offer a personalized assessment.

Can student loans be included in a mortgage?

Student loans can be included in a mortgage if you have enough equity in your home. Rolling student loans into a mortgage generally requires the borrower to take out a cash-out refinance loan, which allows you to turn a portion of your home’s equity into cash. Once you have the cashout in hand, you can pay off your existing student loans.

Terms may vary by lender. There are certain programs, such as Fannie Mae’s Student Loan CashOut Refi that specialize in this type of borrowing.

How much of student loans is counted for a mortgage?

Student loans are evaluated as a part of your overall debt-to-income ratio. In general, lenders avoid lending to borrowers with a debt-to-income ratio greater than 43%.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

Let’s talk about student loan payments. Woo-hoo! OK, it’s not the most thrilling topic, but know what is serotonin-boosting? Paying off that very last loan.

How to Pay Off Your Student Loans

It’s the unglamorous work that goes on behind the scenes that make or break every business owner, athlete, or creative person. It is helpful to think about student loan repayment like any other big feat worth accomplishing.

It begins with knowing that paying down student loans in a smart and effective way can take a lot of planning, budgeting, and adapting.

While there is no single smartest way to pay off student loans, because everyone’s situation is different, there are steps that will put most borrowers in a position to pay off their student loans without too much pain and on a timeline.

Another goal could be to create a financial plan that includes your loans.

Strategies to Pay Off Student Loans

Here are nine steps to consider including in your student loan repayment plan.

1. Organizing All Of Your Debt, Including Student Loans

Keeping track of your student loans and other sources of debt can be tricky, especially if you are a recent graduate. Consider listing them. Include the student loan servicer, amount of the loan, monthly payment, interest rate, and when the loan should be paid in full.

If you aren’t sure what your monthly payments will be, you can use this student loan calculator to get a rough idea, or you can call your loan servicer.

If you have credit card debt or personal loans, include them on your debt list. With all of your sources of debt, you can then mark on a calendar the date that the monthly payments are due.

While you always need to make the monthly minimum payments on all debts (unless your student loans are within their grace period or are in forbearance), listing them allows you to identify which debts you may want to pay off first.

If you have high-interest credit cards adding up each month, a credit card consolidation loan may be a great option to look at, too.

Once your credit cards are paid off, you’ll want to think about whether your goal is to pay your loans off quickly, or to simply make the monthly payments until the loans are done. The former is one way to save on interest over time.

Some folks do prefer to pay only the minimum monthly amount on their student loans so that they can save a little for other things.

2. Budgeting to Include Loan Payments

It can take time and effort to develop a monthly budgeting system that works for you, but it is doable, and totally worth it.

To get started, track your monthly cash inflows and outflows for two months. Total how much money you spent in each category, including debt payments like student loans.

Once you have a general idea of what you’re spending in each category, you can begin to build a budget framework. For example, if you spend $300 on groceries one month and $350 the next, you can now set a realistic grocery budget. Leave room for annual and quarterly expenses as well as incidentals.

With a budget that is built to include student loan payments, you’ll be more equipped to make all of your payments on time and know how much is available to spend on other wants and needs. Also, understanding how you’re spending will allow you to identify the areas where you’re overspending.

3. Setting Up Automatic Payments

Hopefully your student loan payments are set up to be automatically deducted from your bank account. If they aren’t, you can contact your student loan servicer to set up autopay. That way you won’t miss a payment because you forgot or are somewhere where you can’t access the internet.

Remember, missed or late payments will negatively affect your credit score. Damaged credit could preclude you from opportunities in the future, such as being able to refinance your loans.

Many loan service providers offer a discount if you arrange to autopay. When you sign up, ask if such a discount is available.

4. Paying More Than the Minimum Monthly Amount

Paying more than the minimum monthly payment can be a great strategy if your goal is to pay off your loan faster than the stated term. You’ll also save on interest over the life of the loan by paying it off sooner. Even small amounts can make a difference.

To do this, instruct your loan servicer to apply any extra payments to the loan principal, or adjust your automatic monthly payment to a higher amount and clarify that you want that extra money dedicated to the principal.

Make sure, after the next month’s payment, that the money was indeed put toward the loan’s principal.

Recommended: Why Making Minimum Student Loan Payments Isn’t Enough

5. Paying a Lump Sum Toward Student Loans

Increasing your monthly payment isn’t the only way to put a dent in your loans; at any point, you are allowed to make a lump sum payment toward the principal.

You could put your tax refund, holiday or birthday money, work bonuses, or inheritance money toward your student debt.

6. Adjusting Your Repayment Plan If Needed

Most federal student loans come with a 10-year repayment plan unless you choose otherwise.

Income-driven repayment plans base payments on discretionary income and family size. The plans lower monthly payments by extending the length of repayment to 20 or 25 years, after which any remaining loan balance is to be forgiven.

Even though your monthly payments are lower, you will pay more interest over time (longer loan terms mean more interest payments, after all). So it’s not a great choice if you want to pay off your student loans quickly or pay as little interest as possible, but it is available to those who are having trouble making their monthly payments.

If you are planning to use the Public Student Loan Forgiveness (PSLF) program for your federal student loans, you will need to select one of the income-driven repayment plans.

7. Considering Refinancing Your Loans

When you refinance one or more student loans, a private lender like a bank, credit union, or online company pays off your current loans and issues one new student loan, ideally at a lower interest rate. A lower rate could mean substantial savings over the life of the loan.

With federal student loan consolidation, on the other hand, the government bundles your federal student loans into one, using a weighted average of the interest rates, rounded up to the nearest one-eighth of a percentage point.

It’s important to note that by refinancing your federal student loans to a private student loan, you will not be able to access federal programs like income-driven repayment plans, PSLF, and government deferment or forbearance. If you don’t need any of those benefits, a lower rate gained by refinancing could be worthwhile.

Exploring refinancing with a private lender takes little time and doesn’t cost anything.

8. Knowing Your Worth and Asking for a Raise

With any pay raise, you can use the extra income toward your financial goals. This could mean increasing the monthly amount you pay toward your student loans or making a lump sum payment.

How much money you earn is an important factor contributing to your financial stability and ability to pay down your student debt. While budgeting is important, so is knowing your worth and asking for more when you deserve it.

If you haven’t already, start keeping track of your successes so that at your next compensation conversation, you have concrete examples on why you deserve a salary bump.

9. Understanding Your Employment Benefits Package

Although student loan repayment help is not as widespread as retirement or health care benefits, more employers are offering that perk to attract and retain employees.

Whenever you’re comparing job offers, it’s a good idea to compare benefits packages; although they’re not flashy like a big salary or company equity, benefits can be just as valuable.

If you’re looking for a new job, you could include student loan repayment help in your search. While it obviously shouldn’t be your only consideration, it’s great to have an idea of what you’re looking for in an employer.

Recommended: Finding Jobs That Pay Off Student Loans

Refinancing Student Loans

Refinancing is among the ways to pay off student loans, and SoFi is a standout in that field. SoFi refinances federal and private student loans with fixed or variable rates and a range of loan terms.

Take a close look at your student loan balance and the rates you’re paying, and then check your refinance rate in two minutes.

FAQ

What is the smart way to pay off student loans?

To pay off any loan, it’s smart to look at the interest rate and repayment term. If you can manage the monthly payments, a short term and a low rate is a winning combo.

If the payments are too painful and a longer term is needed, it could be smart to make extra payments of any amount whenever you can.

The PSLF program forgives any remaining Direct Loan balance after 10 years of on-time payments and qualifying employment. That could be seen as a smart way to pay off federal student loans if a graduate commits to working for a government or nonprofit employer, but the program has had a 98% applicant denial rate.

How can I pay off $100k in student loans in five years?

Say what? Well, it has been done. It might take sacrifice (moving in with relatives, no eating out, no new car), putting chunks that would normally go to rent toward student loan debt, staying motivated by watching and listening to others’ stories of debt repayment, refinancing one or more times, and getting aggressive about payments.

Most refinance lenders will offer a lower rate for a shorter loan term. Of course, the shorter the term, the higher your monthly payments will be, but the less costly the loan will be. A borrower might find that a variable rate, which usually starts lower than a fixed rate, pays off with a short-term loan.

How do I pay off a five-year loan in two years?

By paying extra toward the principal, in dribs and drabs or in a lump sum, and/or refinancing to a lower rate. Federal law prohibits prepayment penalties for federal or private student loans, so that’s not a worry.

To keep your student loan servicer from applying extra amounts to the next month’s payment, tell your servicer, by phone, mail, or online, to apply any extra payments to the loan principal.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

First you take out a credit card because it has a great airline rewards program. Then you take out a card because it gives you a fabulous discount at your favorite retail spot.

Maybe you had some bills you couldn’t pay off right away, and so you decided to open up another card to cover those costs. And on and on you went, until suddenly you have a wallet full of credit cards—and a hard time keeping track of them.

If you find yourself in this situation, you may want to stop and assess to be sure you haven’t set yourself up to overspend, forget to make payments, and run up a heap of credit card debt. Consolidating your cards can sometimes provide a solution, allowing you to ditch keeping track of your excess cards and focus your energy on just one bill.

How Credit Card Consolidation Works

Credit card consolidation is the practice of combining your credit card balances with one new loan from a financial institution or another credit card company. Ideally, the new loan or credit card consolidation terms will allow for multiple credit cards—perhaps some with sky-high or variable interest rates—to be consolidated with one loan, ideally at a more manageable interest rate.

If you’re not quite sure how that could help your debt management, think of it this way: We all have that one closet or drawer that is just filled to the brim with random stuff—knick-knacks, boxes, childhood toys, and clothes that you just don’t have room for. It gets so bad that either you’re too afraid to open your closet, or the closet is so full that you physically can’t open it.

That closet represents your credit card debt. You might have one, two, three, or four or more cards—and you may even be making minimum payments—but with so many cards to juggle, you may not be paying attention to details on the bill, like how much interest and fees you’re accruing.

It may seem easiest to put this debt out of sight and out of mind. This feeling is understandable; credit card debt can be overwhelming to the point that it seems easier to just keep the closet door closed.

When you consolidate your credit cards, instead of having to remember multiple payment deadlines (and accruing multiple separate fees and interest balances), you’ll only have one payment.

Not only is debt easier to manage and pay off when you only have one loan, consolidating your credit card debt may mean that you could also get a lower interest rate, which may help reduce how much you pay over the long-term.

This factor may be especially helpful considering that the average credit card interest rate hovers around a whopping 17%.

Here’s a look at some of the common methods you may consider using in order to consolidate your cards.

Consolidating with a Credit Card Balance Transfer

One common way to consolidate your credit card debt is with a credit card balance transfer that puts all of your credit card debt onto one new card. In fact, many credit card companies will offer low interest—or even 0% interest—transfers for a certain period of time to encourage you to use a balance transfer for consolidation.

However, if you’re considering this route, there are a few things to remember. First, as mentioned, the low or 0% interest rate may only be introductory rates, which means you’ll have a limited amount of time to take advantage of them.

After the introductory period, rates my skyrocket, perhaps becoming even higher than your interest rates from before. So, this strategy may work best if you have a manageable amount of debt and could pay it off within the introductory period or shortly thereafter.

You may also have to pay a balance transfer fee, which may be a fixed fee or a percentage of the amount that you owe. If you carry a high balance on your cards, this fee could be prohibitively expensive.

Additionally, new purchases on this card may not be treated the same way as your transferred debt. For example, you may have to start making interest payments on new debt immediately.

Using a Debt Consolidation Loan

Your bank may offer a specific debt consolidation loan that allows you to corral your credit card debt—and even medical debt or personal loan debt—under one loan. One single loan can simplify your payments, and may even carry a lower interest rate than your credit cards.

As with credit card balance transfers, beware the teaser rate with these loans. Low interest rates may only last a short period of time before your bank hikes your interest rate. Consider the cost of fees to take out the loan as well.

Another important factor to consider is the term of the loan. While your interest rates may be lower, the length of time over which you’ll be paying may actually increase the amount of money you pay over time.

Taking out a Personal Loan

You may also want to consider a personal loan to help you consolidate your debt. Banks and lenders typically offer these unsecured loans. Interest rates may be lower than those you are currently paying, but you may want to consider that, depending upon your credit history and the lender’s criteria, the lowest interest rates may not be offered to you. Also, personal loans may come with origination fees, which may be between 1% and 8% of your loan.

Potential Benefits of Credit Card Consolidation

Credit card consolidation is an option to help make your debt more manageable. While it won’t magically whisk away your debt, better terms may give you the confidence, organization, and time you need to get rid of it altogether.

A credit card consolidation loan may help you pay the debt off sooner, or at a lower interest rate, and give you emotional and financial relief.

And because with consolidation all of your debt will be combined into one new loan, you’ll only have to remember one payment deadline, helping to reduce the likelihood of late payments and fees.

Unlike filing for bankruptcy or defaulting, although credit card consolidation may have an initial negative effect, if you do pay off your debt you may be able to raise your credit score in the long run. It may provide you with a tangible solution to tackle your credit card debt head on.

Should You Consider Credit Card Consolidation?

If you have a large amount of high-interest debt and want a simple, more streamlined way to manage your credit card payments, you may want to consider credit card consolidation via a fixed-rate, unsecured personal loan.

Understanding whether this is the right avenue for you also depends on your personal financial situation. Here are a few hypotheticals:

You…

Have a plan to pay off your debt.

Is credit card consolidation right for you?

Credit card consolidation isn’t a quick fix. It typically works best if you have a long-term debt management plan that includes budgeting and a plan to cut spending.

You…

Have manageable debt.

Is credit card consolidation right for you?

One possible way to figure out if your debt is manageable is if you answer “yes” to either of the following questions: Can you pay off your debt in five years? Is your debt less than half your yearly income?

You…

Are serious about paying off your debt.

Is credit card consolidation right for you?

Sometimes credit card consolidation can boost your confidence a little too much, resulting in a more relaxed approach to debt payoff. You can potentially avoid this pitfall by taking your debt payment plan seriously and committing to making the necessary payments (at least the minimums) each month.

You…

Can pay off your credit card debt in six months or less.

Is credit card consolidation right for you?

Probably not. If you can pay off your debt that quickly, then the savings you’d receive from consolidating your credit card debt would likely be minimal.

Potential Cons, and Other Factors to Consider

When you consolidate your credit cards, it’s easy to feel like you have a new lease on life. But in taking out a consolidation loan (or balance transfer), you are still taking on debt and will still need to make payments on time to avoid late fees and damaging your credit. Avoid simply kicking the proverbial can down the road by making a plan to pay off your new loan.

Lenders take your credit history, income, and other factors into account when considering you for a personal loan to consolidate your credit card or other debt.

If you’ve been making on-time payments, meet income criteria, and have a credit history that meets the lender’s eligibility requirements, then consolidating your credit card debt might be worth looking into. The sooner you can set yourself up to pay off your debt successfully, the better (generally), and credit card consolidation can be one way to go about it.

With a SoFi personal loan, you can check your rate and terms without affecting your credit score1 and if you like what you see you can apply to consolidate your credit card debt into a new loan with no origination, prepayment, or late fees—and that could help give you that confidence, organization, and time you need to get a better handle on your debt.

Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SOPL17107

In order to get approved for some student loans, some borrowers may choose to apply with a cosigner — a creditworthy individual who will be legally responsible for repayment should you default, become disabled, or die.

While there is no credit check or requirement to add a cosigner for most student federal student loans, students applying for private loans may consider adding a cosigner to their application. Applying for a student loan with a cosigner can help strengthen the overall application and as a result, may help a borrower get approved for a loan they otherwise wouldn’t have or could help the borrower secure a more competitive interest rate than they would have alone.

But, adding a cosigner is a serious decision, for both the borrower and the potential cosigner. That’s because both the cosigner and primary borrower are both equally on the hook for the loan. Read on for some cosigner mistakes to avoid.

Understanding the Role of a Cosigner

A cosigner is someone who signs onto a loan with a primary borrower, and in doing so, takes full responsibility for the loan. This means that if the primary borrower is unable to make payments on the loan, the cosigner is responsible for stepping in. The loan will appear on the cosigner’s credit report and if there are any missed or late payments, the cosigner’s credit score can also be impacted.

Pros and Cons of Cosigning on a Student Loan

There are benefits and downsides to having a cosigner on a student loan.

Pros of a Cosigner

If a student isn’t approved when applying for a student loan without a cosigner, the major pro of adding a cosigner to a student loan application is that the borrower becomes a more favorable candidate for the loan.

Additionally, adding a cosigner can help boost the creditworthiness of the application, allowing the student borrower to secure a more competitive interest rate or more favorable terms on their loan.

If the student is approved for the loan with a cosigner, this can help the student borrower build their own credit history as they make on-time payments on the loan.

Cons of a Cosigner

The cosigner’s debt-to-income ratio can be impacted by cosigning on a student loan. This could potentially impact the cosigner’s ability to borrow down the line, depending on their overall financial situation.

Additionally, because the cosigner is equally responsible for repaying the loan, if the primary borrower have any issues repaying the loan this could lead to serious implications for the cosigner, including:

•   The cosigner is responsible for making payments if the primary borrower cannot.

•   The cosigner’s credit report and credit score could be negatively impacted.

And having a cosigner on a student loan can potentially add stress or strain to the relationship should anything go wrong during the repayment process.

Mistakes to Avoid When Adding or Removing a Cosigner

Borrowing a private student loan with a cosigner is common. According to the Measure One Private Student Loan Report published in December 2021, during the 2021-2022 school year, 92.16% of newly originated private student loans borrowed by undergraduate students had a cosigner. But, before you jump in, make sure you understand the ins and outs of choosing — and removing — a student loan cosigner.

(And while you’re at it, check out SoFi’s Student Loan Debt Navigator tool to assess your student loan repayment options.)

1. Ignoring Your Income and Cash Flow

When you apply for a private student loan or refinance, lenders check your financial fitness (credit score, debt-to-income ratio, etc.) to see if you qualify.

Some lenders, (including SoFi) will review a borrower’s income as part of their eligibility requirements and may also consider something called “free cash” flow — the amount of money you have left at the end of each month after subtracting taxes and cost of living expenses. If the lender feels you lack the necessary free cash flow to repay your loan, either your application will be declined or your loan will be approved at a less-than-desirable interest rate.

If your cash flow is more of a trickle, the lender may prompt you to add a cosigner to your application.

2. Going for Romance

When considering the best cosigner, steer clear of asking your boyfriend or girlfriend. If the relationship goes south after signing, your ex will still be legally responsible for the loan. Would you want to be on the hook for the student loan payments of someone you’re no longer dating?

Instead of focusing on a romantic connection, it may make sense to consider family members. Though anyone can cosign a loan for you, a relative is generally a more reliable choice than a friend. Typically, a cosigner is a parent or guardian, spouse, or other family relative.

3. Going in Blind

A family member may think cosigning a loan is as simple as signing his or her name on a contract, but it’s more complicated than that. A cosigner is a coborrower, which means the debt will show up on your credit report and on his or hers.

Plus, if you can’t make good on your loan for any reason, the lender has the legal right to pursue your cosigner for repayment.

4. Failing to Set Expectations

It may be unpleasant, but it’s important to discuss worst-case scenarios with your cosigner. If you lose your job and can’t make payments, your cosigner must be prepared to assume full responsibility for the loan. Plus, you’ll need to discuss whether you’ll repay that person should he or she have to make payments at some point, or if those payments will be gifts.

Note: Once you set clear expectations, it’s a good idea to sign a legal agreement together. Depending on your relationship, the agreement can be as simple as an email or as formal as a document drafted by a lawyer.

5. Expecting a Handout

If you think a legal agreement sounds drastic, keep in mind that a friendly cosigning situation can go sour when you don’t hold up your end of the deal. As mentioned, if the primary borrower fails to make payments on their loan, the cosigner is equally responsible. That means they’re responsible for repaying the loan if the borrower cannot, their credit score can also be impacted by late payments, and should the loan go into default, collections agencies can try to collect from the cosigner as well.

Word to the wise: Don’t make your cosigner regret doing you the favor. The fact is, your cosigner is taking a risk for you. You should feel confident in your ability to repay the loan fully on your own.

6. Not Understanding How to Remove a Cosigner

When you start conversations with a potential cosigner understand the options for removing them down the line. Some lenders may offer an official cosigner release option. This means filing an application with the lender to remove the cosigner from the loan. If the lender doesn’t offer cosigner release, it may be possible to refinance the loan and remove the cosigner.

Not all lenders offer a cosigner release option — and those that do have stipulations for removal. Typically, you’ll need to make anywhere from 12 to 48 months of on-time, consecutive payments to qualify for cosigner release.

The lender will also look at your overall financial situation, including how well you’ve managed other debts, and may require that you submit supporting documentation such as a W-2 or recent pay stubs.

Understanding your lenders requirements for cosigner release and ensure you are establishing strong financial habits like making monthly payments on time, and are effectively budgeting and saving, could potentially improve your chances of being approved for a cosigner release.

7. Not Realizing Refinancing May Still Be an Option

In the event you aren’t successful in removing your cosigner via cosigner release, another potential option is refinancing the loan. When you refinance a loan, you take out a new loan (sometimes with a new lender), that has new terms. Doing this can allow you to potentially remove your cosigner, so long as you are able to meet the lender’s eligibility requirement on your own.

While refinancing can be an option to consider for some borrowers, it won’t make sense for everyone. When federal loans are refinanced, they are no longer eligible for any federal protections or programs.

The Takeaway

Adding a cosigner to your student loan can truly work to your advantage, potentially helping you qualify for a more competitive interest rate on a student loan or a refinance. So if someone in your life has offered to cosign, consider it seriously — just make sure you both understand what you’re signing up for from the start.

SoFi makes it easy to add a cosigner to student loan or refinance applications and borrowers can apply for a cosigner release after 24 months of on-time payments.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.