For many people with high-interest private student loans, refinancing is a good option to save money. This lets borrowers find new loan terms and lenders that can help them get their private loan debt back under control. 

Before you refinance private loans, consider the pros and cons. Keep in mind that refinancing federal student loans means a loss in many irreplaceable benefits – potential to have loans forgiven, options for payments based on income, and generous options to pause payments during job loss or economic hardship.

Unfortunately, not everyone who applies for refinancing gets accepted. And if you don’t know what causes rejection, your attempt to refinance may be doomed from the very beginning.

To improve your chances, check out our list of possible reasons why your student loan refinance was denied.

Credit Score

The most common cause of student loan refinancing rejection is your credit score. To a lender, this is the primary indicator of whether you are going to pay your loan back in a timely manner. 

Payment and Credit History 

Credit isn’t the only factor in whether you get approved or denied. The lender will also pay special attention to your payment and credit history.

If you’ve missed several payments in the past, they are likelier to reject your application. And missing payments will also drag your credit score down.

A credit history that includes things like liens, bankruptcies, and/or foreclosures is going to throw up several red flags to any lender that you approach.

Job History 

Maybe you have solid credit and an awesome credit history. However, it’s still possible that your infrequent job history may cause your application to be denied. 

This is because a steady job is the only way that you can pay back everything that you owe. If you haven’t been in your current job very long, or you have a history of only working for short periods of time, the lender will be skeptical about your ability to make payments.

Overall Income

Speaking of jobs, the lender is going to scrutinize your annual salary. Basically, they want to make sure that you are making enough money that you can reasonably make monthly payments on top of your other bills. 

There is no magic number when it comes to healthy income. Instead, lenders will compare your annual salary to your overall debt to make their final judgment.

Debt-to-Income Ratio 

Your debt-to-income ratio is a calculation of your overall debt (including student loans, credit cards, mortgages, car loans, etc.) versus your overall income.

Different lenders have different ideas about how high is “too high” for this ratio. For example, you typically cannot receive a mortgage with a debt-to-income ratio higher than 43%.

If you know your ratio is high, it may be worth paying down some of your debt before you seek refinancing.

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.