If you’re struggling with student loan payments or looking for a better deal on your debt, refinancing your student loans could be a smart financial decision. Refinancing involves taking out a new loan to repay your existing federal or private loans—or a mix of both—then paying it off according to the new terms.
If you can refinance your student loans at a lower interest rate than you currently have, you could potentially pay less in interest over the life of the loan—especially if you shorten your loan term. You can also take the opposite approach and extend your loan term, which may cost you more in interest because it has more time to accrue, but could lower your monthly payments making debt more manageable.
Because refinancing also combines multiple student loans (private or federal) into a single loan, it could also potentially simplify your repayment process. Unfortunately, not everyone who applies for student loan refinancing is successful.
If you’ve had your application for refinance denied, the result can feel confusing and disappointing. But getting a no isn’t the end of the road.
There are some common reasons why your loan may have been denied. By understanding those factors, you can take steps to correct any gaps or weak spots in your application and possibly improve your chances of refinancing in the future. Considering the advantages of refinancing for many borrowers, the effort might be worth it.
Common Reasons that Refinance Applications Are Rejected
If you’ve had your application for student loan refinance denied, the decision can feel like a mystery. The lender might not necessarily explain the reasons behind its actions, and you may be left feeling puzzled and stuck. As with a car loan rejection or loan modification rejection on your mortgage, a common thread is that the institution feels that lending you money is too much of a risk. Does one of these scenarios sound familiar?
1. You Have a Low Credit Score
Like other types of lenders, institutions offering a refinancing loan want to feel confident that borrowers will pay back the debt. One of the primary ways that they measure how risky you are as a borrower is by looking at your credit score. Many factors affect your credit score, including whether you’ve missed payments on credit cards or other bills, your credit history, and how much debt you’re carrying relative to your credit limits.
You can find out your current credit score through one of the three major credit bureaus: Experian, Equifax, and TransUnion. If your score isn’t up to par, that could be enough to have your loan denied.
2. You’ve Missed Payments in the Past
For some, it’s easy to let a student loan payment slip now and then. Perhaps you ran into financial difficulties and couldn’t afford to pay, or maybe you simply forgot amid the chaos of life.
Even though it’s understandable, lenders don’t look at a history of missed payments lightly. If you’ve failed to pay in the past, they may see this as a sign that you’ll skip payments with them as well. If your loan is delinquent or in default because you’ve missed too many payments, a potential lender may be even more concerned.
3. You Don’t Make Enough Money
When deciding whether they trust you as a borrower, financial institutions want to feel confident that you can afford to repay the loan. If your salary is low compared to the monthly payment you would owe, lenders might make the call that you’re at risk of not being able to pay.
4. Your Debt-to-Income Ratio Is Too High
Even if you earn a decent salary, a private lender could deny your application if they think your debt-to-income ratio is too high. Your debt-to-income ratio is the ratio of your outstanding debt to how much you currently make. Debt here includes anything you owe, including a mortgage, a car loan, student loans, credit card balances, or medical bills.
If those liabilities are high compared to your salary, the lender can decide that giving you a loan is too risky because you may not be able to afford it with your existing financial obligations.
5. You Don’t Have a Solid Job History
Lenders aren’t just looking at your salary. Many also want to get a sense of how solid your job is by considering things like how long you’ve been in your current role, past gaps in employment, and how often you change jobs.
If you haven’t held onto a job long or had much work experience, a lender could fear that you are at risk of losing your current gig—and your income along with it.
6. You Have Other Financial Black Marks on Your Record
A lender is looking out for any sign that you may not be a trustworthy borrower. A significant negative financial event in your history—such as a lien, judgment, foreclosure, or bankruptcy—can be a red flag for the institution. There may have been a good reason for it, but the lender could decide that lending to you is too precarious.
Potentially Improving the Chances of Refinancing
1. Trying Other Lenders
If you’ve been denied by just one or two lenders, it may be worth shopping around more widely. Although they follow similar principles, lenders each have their own protocols for reviewing applications.
While one might give more weight to income, another may consider education history just as important. You never know whether a lender will see you as a trustworthy borrower until you try. If you’ve been denied by multiple institutions, you may need to take some other action to improve your prospects.
2. Improving Credit
Because your credit score is so important to lenders, including with student loan refinancing, you can work on raising it if it’s on the low side. There are many ways to potentially improve your credit score.
If you have missed bills in the past, you can focus on consistently making your minimum payments on every loan, bill, and credit card you have (setting up auto-pay can help you stay on top of this).
3. Raising Your Income
If your income is relatively low, earning more money may help you qualify for refinancing. This is easier said than done, but you may have more options than you think.
Can you ask for a raise or request more hours at your current job? Can you look for a higher paying role with your employer or elsewhere? Does switching fields make sense? Can you take on another job or side hustle? It’s not always possible, but increasing your earnings could make you a more appealing candidate for refinancing.
4. Giving it Time
Sometimes, it can be good to wait. If you have a bankruptcy or missed payments in your past, it’ll take time for these to disappear from your credit history. (It takes seven to 10 years for a bankruptcy to be removed from your credit history.) Even if you’re making all your payments now, a lender usually wants to see that this good behavior is consistent.
Waiting until you’ve been in a new job for a couple of years can help convince lenders that your employment is solid. If these are some of the challenges you’re dealing with, time may be the best medicine. And for those struggling to make consistent payments on their student loans, it could be worth looking into income-driven repayment plans.
These are repayment plans for federal student loans that calculate monthly payments based on your discretionary income. While an income-driven repayment plan might mean you’ll pay more interest over the life of the loan, it could also lower your monthly payments, thus making your student loan debt more manageable.
5. Getting a Cosigner
If none of the above tactics are working, or if you don’t want to wait to refinance, you can try reapplying with a cosigner. If this person—perhaps a parent or family friend—has solid credit and employment history, that may help you get approved for a loan or qualify for better terms.
That’s because the cosigner—by essentially guaranteeing the loan—makes you much less of a risk for the lender. But keep in mind that the cosigner’s credit score could be affected by missed payments on the loan, and they may have to make payments on the loan if you’re unable to.
Refinancing May Still Be Possible
Even if you’ve been denied in the past, that doesn’t mean you’ll never be able to refinance your student loans. Understanding the reasons that refinancing applications frequently get rejected can help you figure out where you have room to improve.
You have lots of options for strengthening your application and reducing your riskiness as a borrower, from earning more, to improving your credit score, to getting a cosigner. If refinancing is a student loan debt solution you feel strongly about, consider implementing these action items before reapplying.
And remember that while refinancing has lots of benefits, you’ll lose access to federal loan benefits when refinancing with a private lender. So refinancing may lower your interest rate or get you a more favorable loan term, but it will also disqualify you from taking advantage of federal programs like income-driven repayment plans.
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.
SoFi Student Loan Refinance
Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income-Driven Repayment plans, including Income-Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
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 .