Can you refinance student loans with bad credit?
It may be possible to refinance student loans with bad credit if you apply with a cosigner or shop around with multiple lenders.
Student loan refinancing involves replacing one or more of your current student loans with a new one. Ideally, that new loan will have a lower interest rate, better term, or some other benefit that can help you save money or better manage your debt.
However, it can be challenging to refinance student loans with bad credit. Borrowers with bad credit are considered risky to lenders, which may assign higher interest rates or deny an application altogether.
Fortunately, there are steps you can take to boost your chances of approval. Shopping around with multiple lenders and applying with a cosigner, for example, are two approaches that can help.
How to refinance student loans with bad credit
If you’re applying to refinance student loans with bad credit, the following strategies can help you get approved.
1. Apply with a cosigner
Some lenders let you add a cosigner to strengthen your application when you apply for student loan refinancing.
“If a borrower applies for a private refinance with a cosigner, they are more likely to be approved and may qualify for a better interest rate,” said Mark Kantrowitz, publisher and vice president of research at SavingforCollege.com.
Keep in mind that your cosigner will be expected to make payments if you fall behind. They will be equally responsible for the loan, and their credit will be impacted by late or missed payments.
2. Shop around with multiple lenders
Some lenders are more lenient about credit than others, so it’s worth shopping around. Compare a variety of lenders, including online lenders, banks, and credit unions.
Many lenders let you prequalify for student loan refinancing online, meaning you can check your estimated rates with no impact on your credit score.
3. Improve your credit
If your credit is making it difficult to qualify for low student loan refinancing rates (or to get approved in the first place), take time to improve your credit before you apply. These steps can help:
- Make on-time payments on your loans. On-time debt payments can improve your credit score over time.
- Pay down your debts. The amount of money you owe makes up 30% of your FICO score. Reducing your “amounts owed” can help build up your credit score, so work on paying down the balance on your existing student loans, credit cards, or other debts.
- Decrease your credit utilization. Credit utilization compares the amount of credit you’re using compared to what’s available to you. So if you consistently charge up to your credit limit every month, it could harm your credit. Many experts recommend that you keep your total credit utilization under 30% — but the lower it is, the better.
- Dispute errors on your credit report. Order a free copy of your credit report from AnnualCreditReport.com and review it for inaccuracies. If you find incorrect information, you can dispute it to have it removed.
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5.48% -
Loan Amounts
$10,000 up to total refinance amount
Min. Credit Score
680
Fox Money rating
Fixed (APR)
5.49% -
Loan Amounts
$5,000 - $250,000
Min. Credit Score
680
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Fixed (APR)
5.85% -
Loan Amounts
$5,000 - $250,000
Min. Credit Score
670
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6.00% -
Loan Amounts
$7,500 - $200,000
Min. Credit Score
700
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Fixed (APR)
6.20% -
Loan Amounts
$10,000 up to the total amount
Min. Credit Score
670
Fox Money rating
Fixed (APR)
6.34% -
Loan Amounts
$7,500 - $250,000
Min. Credit Score
680
Fox Money rating
Fixed (APR)
6.49% -
Loan Amounts
$10,000 - $750,000
Min. Credit Score
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When refinancing can help
Here are some scenarios where refinancing could be the right choice for you.
- You qualify for a lower rate. Reducing your interest rate can lower your monthly payment and save you money over the life of your loans.
- You want to change your terms. Refinancing gives you the option to restructure your loan timeline. Paying off your loans faster can lead to interest savings, while extending your terms can offer more affordable monthly payments.
- You want to simplify repayment. If you refinance multiple loans together, you can combine them into a single loan with just one monthly payment.
When refinancing might not make sense
Student loan refinancing isn’t beneficial in every situation. Here’s when you may think twice about refinancing your education debt.
- You have federal student loans. Refinancing involves exchanging your current loans for a private student loan. If you refinance federal loans, you’ll no longer have access to federal protections like income-driven repayment and more flexible deferment and forbearance. Make sure you won’t need these perks before refinancing.
- You’re eligible for student loan forgiveness. Similarly, privately refinancing your federal loans would disqualify them from federal forgiveness programs, such as Public Service Loan Forgiveness (PSLF). If you’re working towards a forgiveness opportunity, you’ll no longer qualify after refinancing.
- You can’t get a better rate. If you can’t qualify for a better interest rate — or would get stuck with an even higher one — refinancing may not save you money.
Refinancing alternatives for student loans
If you’re struggling to refinance student loans with bad credit or decide it’s not the right move for you, consider these alternative strategies for managing your debt.
Federal student loans
- Consolidate your federal loans. The Department of Education offers a Direct Consolidation Loan for borrowers who want to combine multiple student loans into one. While this process won’t save you money, it can simplify your debt or help you qualify for other repayment plans, depending on your loan types.
- Sign up for an alternative repayment plan. If your monthly payments aren’t affordable, you may have options to reduce it. An income-driven repayment plan, for example, could make your monthly payments more manageable.
- Pursue student loan forgiveness. Depending on your profession and where you work, you could be eligible for a program like PSLF or Teacher Loan Forgiveness. Income-driven repayment also ends in student loan forgiveness, usually after 20 or 25 years of repayment.
Private student loans
- Speak with your lender. Your options for private student loan repayment depends on your lender, so reach out to your loan provider or servicer if you need assistance. Some lenders, for instance, will let you skip a payment once per year, change your payment due date, or temporarily pause payments if you’ve run into financial hardship.
- Make extra payments on your loans. If you can afford to pay extra on your loans, you could get out of debt faster and save money on interest by paying more than the minimum each month.