Can You Refinance Your Student Loans? How to Increase Your Chances of Qualifying

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Mark Kantrowitz

By Mark Kantrowitz

November 5, 2021

There are six steps that can improve your odds of being approved for a refinance of your private student loans, sometimes called a private consolidation loan. These include maintaining stable employment, ensuring sufficient income to repay the debt, keeping a low debt-to-income ratio, having a very good or excellent credit score, getting a creditworthy cosigner and shopping around for the best interest rates and fees.

1. Maintain Stable Employment

Lenders prefer borrowers who have graduated from college and have a steady job. A steady job means a steady income to repay the student loan debt. Borrowers who are unemployed are less likely to qualify for a refinance.

Recent college graduates tend to switch jobs frequently. Try to avoid job-hopping. Borrowers who have been employed with their current employer for two or more years, if not longer, are more likely to be approved for a private consolidation loan.

Tip: Increase your chances of approval by staying with your current employer for two or more years.

2. Ensure Sufficient Income to Repay Debt

Some lenders require borrowers to have at least a minimum amount of income. Even if the lender does not have a minimum income threshold, borrowers with higher income are more likely to be approved for a refinance.

Lenders may be concerned that the cosigner has been making the payments on the student loan instead of the borrower. Thus, the lender will want to confirm that the borrower has sufficient income to be capable of making the monthly student loan payments on their own, without help from the cosigner.

Tip: Increase your chances of approval by increasing your income.

3. Keep a Low Debt-to-Income Ratio

Just as lenders have minimum income thresholds, they also have a maximum debt-to-income ratio. A low debt-to-income threshold ensures that the borrower has sufficient after-tax income to repay the debt and maintain a typical standard of living.

Ideally, borrowers should have little or no other debt. It is important to reduce debt, especially credit card debt and other revolving debt. Paying down your other debt will reduce your credit utilization. Avoid carrying a balance on your credit cards by paying off the balance in full each month.

Tip: Increase your chances of approval by increasing income and decreasing other debt.

4. Retain a Good Credit History and High Credit Scores

Lenders typically require borrowers to have a credit score of at least 650. Borrowers with credit scores in the mid-700s and higher are more likely to qualify for refinancing student loans. A borrower with a higher credit score will also qualify for a lower interest rate.

A borrower’s credit score predicts the likelihood that the borrower will be profitable to the lender. Borrowers with higher credit scores are more likely to consistently repay the debt on time. The most important factors affecting credit scores are payment history and credit utilization.

Get a free copy of your credit reports at Correct any errors in your credit report at least a month before you apply for a new loan.

If your application for a refinance of your private student loans is denied, ask the lender why your application was rejected. Sometimes, the reason will be something you can fix, such as a current delinquency. You can cure a delinquency by bringing the account current.

Tip: Improve your credit score by paying all of your bills in full and on time for several years before applying for a private consolidation loan.

5. Get a Creditworthy Cosigner

Most college students are unable to qualify for a private student loan on their own, without a creditworthy cosigner. More than 90% of private student loans to undergraduate students and more than 75% of private student loans to graduate students require a creditworthy cosigner.

Requiring a cosigner gives the lender a second borrower who is obligated to repay the student loan. In many cases the loan is made based mainly on the credit quality of the cosigner, since student borrowers often have a thin or nonexistent credit history.

Refinancing a private student loan without a cosigner is a form of cosigner release. However, the borrower must be able to qualify for the loan entirely on their own, similar to the requirements for cosigner release.

Whether the lender offers cosigner release may be a consideration if the borrower needs a creditworthy cosigner to qualify for the loan. About three-fifths of private consolidation loans offer cosigner release. However, it can be difficult to qualify for cosigner release.

Tip: Getting a cosigner can increase your eligibility for a private consolidation loan and reduce your interest rate

6. Shop Around for the Best Interest Rates and Fees

Some lenders advertise lower interest rates than others. But, what matters most is the interest rate you are offered, if you are approved for the loan. Very few borrowers qualify for the lowest advertised interest rate.

Be careful when comparing variable and fixed-rate loans and loans with different loan terms. Variable rates will be lower than fixed rates in a rising interest rate environment but may cost you more if you are unable to pay off the loan before interest rates rise too much. Fixed-rate loans will generally require a shorter repayment term and higher monthly payments, even if the interest rate is lower.

There is no longer a credit score penalty for shopping around. Apply to several loans to find the best deal.

Verify that you will actually save money by refinancing your loans. Compare monthly payments and total payments, as well as the repayment term, on each loan offer. A longer repayment term will yield lower monthly payments, but will also involve higher total costs over the life of the loan. Don’t believe advertisements that claim that borrowers save a lot of money, since these figures are often exaggerated and do not reflect the savings you will realize.

Be sure to check and compare fees such as origination and prepayment fees, though most private lenders don’t charge these fees for refinancing.

Tip: Apply for a private consolidation loan from several different types of lenders, including banks, credit unions and other financial institutions. Compare costs carefully.

Our Loan Refinancing Calculator shows you how much you can lower your monthly loan payments or total payments by refinancing your student loans into a new loan with a new interest rate and new repayment term.

Refinancing a student loan could possibly lower your interest, saving you money. Consider the pros and cons of student loan refinancing before you decide.

Refinancing federal student loans into a private loan means a loss of all of the federal loan protections and benefits. This includes income-driven repayment plans, the potential for loan forgiveness programs (such as Public Service Loan Forgiveness), generous deferment and forbearance periods if you lose your job or have an economic hardship, and potential widespread forgiveness. If you wish to keep these repayment options, you may be better off consolidating your federal student loans into a Direct Consolidation Loan instead.If you have decided that student loan refinance is right for you, check out our list of the best lenders to refinance student loans.

At, our goal is to help you make smart decisions about saving and paying for education. Some of the products featured in this article are from our partners, but this doesn’t influence our evaluations. Our opinions are our own.

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