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

refinance student loan

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.

Borrowers are often denied for refinancing student loans either because their credit score is too low or they don’t have enough income. With the average student loan debt in the U.S. currently sitting at $37,172, it’s rare that someone will be denied because they don’t have enough student debt.

But that’s exactly what happened to me.

My failed ‘refinance student loan’ strategy

I was fortunate to avoid a staggering amount of student loans during college.

By the end of my college career, I had taken out three separate federal student loans for a mere $9,133. Since two of the loans were already carrying low interest rates, I set out about a year ago to refinance the third.

I was looking to refinance around $3,000. Each of the student loan refinancing options I looked at had a minimum lending amount between $5,000 to $10,000. And while I could have refinanced all of my student loans together to lower my interest rate on this particular one, it wasn’t worth giving up the low interest rates on the other two.

For reference, here are the minimum balances required to refinance student loans with our top picks:

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

If your student loan balance is too low to refinance, you’re not out of options. Here 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.

Balance transfer credit cards offer promotions anywhere between 12 and 24 months, during which you can pay off the balance with a 0% APR.

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

  • If you fail to make the minimum payment at any time during the promotion, you’ll lose the 0% APR.
  • Not all balance transfer credit cards accept student loan balances. WalletHub’s 2015 balance transfer report lists which ones do.
  • Most balance transfer cards charge a fee, usually a percentage of the balance you transfer. Depending on your interest rate and the fee (usually three to five percent), 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.

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.

That may be easier said than done, though. Many student loan borrowers opt for income-based repayment plans because they can’t afford to make bigger payments. Therefore, 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.

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 second-hand options before buying new.

Also, reach out to your cell phone and internet providers to try to talk down your rates. And when it comes to cable TV, look into cheaper alternatives or cut 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 because of a low balance, 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.

Interested in refinancing student loans?

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