An account was opened prior to cosigner being a servicemember. The question is related to whether the Father (who is the primary borrower)qualifies for the interest rate reduction based on the cosigners (Son) enlistment into the military service. My initial understanding is that the father would be allowed the rate reduction but I would like confirmation.

If this is a true co-signer loan and not a co-borrower loan then IMHO opinion the father should not be eligible for the rate reduction under these circumstances (his ability to repay is not hindered), however the son is liable on the debt, and from 527(a)(1)(b):

during the period of military service, in the case of any other obligation or liability.

So in reference to 527(a)(1)(b), if a co-signer notifies a creditor that he/she is called to active duty, the interest rate reduction should be applied to the obligation, correct?

I think this can actually be a gray area. I would recommend going to 6%, but the coverage actually applies to a servicemember or a servicemember and their spouse, jointly.

You could argue this isn't a joint loan with the borrower or that the loan was made to the co-signer, and that this protection doesn't apply to them. Reputational risk and the work involved tells me I'd seriously consider 6%, but based on your terms and amounts, you may consider otherwise.

I'm interested in others opinions.