What Are My Options if I Can’t Refinance My Student Loans?

Last updated 03/28/2024 by

If you’re struggling to make your student loan payments, or just want to pay them off faster, you’ll usually get the same advice: apply for refinancing. That’s great advice and often leads to lower interest rates and an easier repayment schedule. However, what if your application is denied? What if you can’t refinance your student loans?

That’s when things get a little trickier, especially if you pinned all your hopes on getting approved.

Thankfully, refinancing isn’t the only way to make your debt journey a little easier. Here are a few options to lighten the load, and a breakdown of how you can make your next refinancing application successful.

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Pay more than the minimum due

If you can’t refinance your student loans and want to pay them off quickly, the best way forward is to start paying more than the minimum. Any extra money you add to your loans will decrease the principal faster and speed up your repayment timeline.

Those who have multiple loans should write down how much they owe for each loan, the interest rate, and the minimum payment. Then, you can decide which loans to pay more on each month by using the “snowball” or “avalanche” method.

Consumers who choose the snowball method pay more money on the loan with the smallest balance first, while those who pick the avalanche method pay down the loans with the highest interest rate.

The snowball method is popular because users feel more motivated when they see small balances eliminated quickly. However, the avalanche method saves more on interest, because the highest interest loan is paid down first.

Choose a different repayment plan

Oftentimes, graduates look to refinance their student loans so they can lower their interest rate and pay off their debt faster. Some people refinance so they can have a lower monthly payment. If you belong to the latter group, you have some options beyond refinancing.

On federal student loans, there are several repayment options for those who want to decrease their monthly payment. These include extended terms that might even forgive any remaining balance, as well as plans that start with a low payment and gradually increase every two years.

If you have private loans, contact your lender to see what options they offer. Some private student loan lenders have unique repayment plans they offer to borrowers with a solid track record of making payments on time.

Make sure to reach out before you fall behind and miss a payment — lenders are much more willing to work with someone in good standing.

If you can’t refinance student loans, improve your borrower profile

If you want to try refinancing again, you have to figure out why you were denied in the first place.

Your debt-to-income ratio is too highYour credit score is too lowYour credit score is too lowYou don’t have a stable jobYour income is too low

Look at your rejection letter and see the reasons they cited. Some might be difficult to fix quickly, such as increasing your income, others are more doable.

Credit score and student loans

If your credit score was one of the explanations given for a rejected application, look up your credit report online. You’ll be able to see any negative marks, such as late payments or a history of bankruptcy. Most lenders want a credit score of 700 or higher to qualify for student loan refinancing.

Your credit report will also show your credit utilization figure, which is how much credit you’re using out of the total available to you. Lenders like to see a credit utilization percentage of 30% or less. A high figure shows you might rely too much on credit to meet your financial responsibilities.

The best way to improve your credit score is to make all payments on time, pay off your credit balance every month, and avoid opening new lines of credit. Free services such as Credit Karma allow you to track your credit score and see whether it’s trending upward.

Student loans repayment and your income

Low earners can try to improve their chances by growing their income, either by finding new work or taking on a part-time gig. Not only will a higher salary look better to lenders, you can also put the extra cash to good use and pay off some of your debt.

Another factor to consider is how much you spend every month compared to how much you earn. If your monthly bills total $2,500 and you only earn $2,600 a month, lenders will assume that an emergency could derail your finances and make it difficult for you to pay your debt.

Creating a larger gap between what you take home and what your bills cost will free up your budget and increase your chances of qualifying for a refinance.

Anyone can refinance their student loans, whether they have private or federal loans. However, if you have federal loans, refinancing means giving up those federal protections such as deferment and forbearance. If your income is steady, it might be worth refinancing so you can get lower interest rates.

But if you have trouble making your payments, then stick to the federal loans. Once you’re ready to refinance your student loans, go here for the list of qualified student loan lenders.

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