3 Ways to Tackle Your Student Loans If You Can’t Refinance

 January 6, 2020
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Refinancing student loans can be a great way to lower your interest rate and monthly payments. While there are several refinance student loan options, each come with eligibility requirements — and in some cases, you may not be able to refinance.

If that’s the situation you’re in, there are a few alternatives to tackling your student loan debt.

Why you may not be able to refinance your student loans
3 steps to take if you can’t refinance student loans
Refinancing student loans isn’t your only option

Why you may not be able to refinance your student loans

Borrowers may be denied for refinancing student loans for a number of reasons.

For instance, a borrower may be denied either because their credit score is too low to qualify or they don’t have enough income for a lender to feel confident that they can pay back what they owe. It is possible to refinance student loans with bad credit if you have a parent or partner cosign, which means they’ll lend their own credit history or higher income to minimize the lender’s risk. However, if you can’t find a cosigner (or a lender whose credit requirements are more lenient), you may simply have to work to improve your credit score or boost your income and wait to refinance at a later time.

Another reason you could be denied a refinance is if you didn’t complete your degree. Some lenders require borrowers to have graduated to be eligible for refinance offers. If you didn’t finish your degree, you’ll need to seek out a lender that’s willing to refinance your student loan debt.

Finally, while it’s rare that someone will be denied because they don’t have enough student loan debt (the Class of 2018 graduated with an average student loan debt of $29,800), it could happen. But that doesn’t mean you’re out of options.

3 steps to take if you can’t refinance student loans

If you aren’t able to refinance, there are a few alternative ways to tackle your student loans:

1. Balance transfer credit card

If you only have a few thousand dollars left on your student loan, a balance transfer credit card can help you pay it off with no interest at all — assuming you pay off the balance in full before the promotional period ends. Balance transfer credit cards offer promotions that last anywhere between 12 and 21 months, during which you can pay off the balance with a 0% APR. In some cases, borrowers can transfer their student loan balance to the card.

There are a few things to keep in mind before choosing this option:

  • You’ll generally need good to excellent credit to qualify for balance transfer cards.
  • If you fail to make the minimum payment at any time during the promotion, some cards will charge a penalty APR — meaning you could lose your 0% interest period.
  • Many balance transfer cards charge a fee, usually a percentage of the balance you transfer. Depending on how big your balance is, the interest rate on the card after the promotional period and the transfer fee (usually about 3%), it might not be worth it.
  • You’ll no longer be eligible for student loan forgiveness programs.
  • If your finances change and you can’t pay off the balance before the promotion ends, you’ll be stuck with a much higher interest rate.

A balance transfer credit card may be a solid option if you have a steady job and predictable income. But if there’s any degree of uncertainty, steer clear. If you end up having to pay interest, credit cards tend to have much higher rates than student loans.

2. Increase your income

Whether or not you’re consolidating or refinancing a student loan at all, the fastest way to cut down your debt is to increase your monthly payments.

You can consider taking on a second job or side gig to boost your monthly income. Also, check your withholdings and deductions on your paycheck. There may be ways to decrease them without compromising other financial goals. You can also ask your employer if there are any overtime opportunities. If you’re a model employee, consider asking for a raise.

Of course, resist the urge to use the increase in your take-home pay for other things. As long as your high-interest student loan account is open, put everything toward that debt if you want to get rid of it as quickly as possible.

3. Live on a bare-bones budget

If you can’t increase your income enough to make a difference, take a look at your expenses. Even if you already budget religiously, you may find areas where you can reasonably cut back to pay off student loans faster.

For example, consider replacing a newer car with a big monthly payment with an older car that’s still reliable. When you’re about to buy something, ask yourself whether you need it. And if you do, consider secondhand options before buying new.

Also, reach out to your cellphone and internet providers to try to talk down your rates. When it comes to cable TV, look into cheaper alternatives or consider cutting the cord entirely.

In the end, your goal isn’t to pinch pennies but to save yourself time and money in the long run. A bare-bones budget will be different for everyone, but as long as you’re cutting unnecessary expenses, you’re on the right track.

Refinancing student loans isn’t your only option

If you can’t refinance student loans, don’t be complacent. Take steps to pay them off quickly so you can have the freedom to use that cash for more important things. The sooner you do it, the sooner you can work toward other, more exciting financial goals.

And if one of the above steps don’t work for you, research student loan forgiveness programs and student loan repayment assistance programs to see if there’s another option for your situation.

Emily Long contributed to this report.