Not everyone who attends college earns a degree. But can you refinance student loans if you didn’t earn a degree or graduate?
You may have decided to leave college to get a job, have financial difficulties, have a family or personal emergency, or just have decided college isn’t for you. Unfortunately, your student debt doesn’t just disappear when you leave campus.
Whether you earned an advanced degree or dropped out after a few semesters, you’re still on the hook for the entire loan balance of any student loans you borrowed. It’s a frustrating situation that many borrowers face – owing money on a degree they don’t actually get to cash in on.
To make things worse, student loan borrowers without a degree face unique challenges and eligibility requirements that can make it even more difficult to become debt-free. Refinancing student loans—while entirely possible—is more complicated than it is for those who graduated with a college degree.
So, what are the options for someone who doesn’t have a degree but wants to refinance to save money on interest or lower their monthly payments? Read on to find out.
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.
Student loan refinancing options for borrowers without a degree
While most student loan refinancing companies require applicants to have a degree, several lenders don’t. These lenders include:
- PNC
- Earnest – you can apply while you are still in college
- RISLA Student Loan Refinance
- Purefy
- Citizens Bank
- EdvestinU
- SoFi – requires an associate degree or higher from a Title IV accredited school
These companies often have more stringent eligibility requirements for refinancing student loans for applicants without degrees. These may include a 650 credit score or higher, little to no additional debt, a decent income, or the inclusion of a cosigner.
Many lenders offer benefits of refinancing to qualified borrowers, such as:
- Autopay discounts
- Fixed-rate and variable-rate loans
- Option to choose your loan term (typically 5-25 years)
- Loan amounts as little as $5,000 (depending on the lender)
- Ability to refinance federal and private loans
- Ability to apply for co-signer release
What to do if you don’t qualify (yet)
As I mentioned above, private lenders often have eligibility criteria that need to be met to refinance student loans. If you aren’t able to refinance yet, try these steps to improve your chances of qualifying.
Improve Your Credit
You can check your credit history for free at sites like Credit Karma or Credit Sesame. Banks like Capital One and Chase also have their free credit score tracker, which you don’t need to be a customer to view.
Hold off on refinancing if your score is below 650, which is the threshold for many lenders. You’re unlikely to be approved, and applying for a loan results in a hard inquiry that could further damage your credit score.
Services like Credit Karma may help explain why your credit score is low. It could be because of a collection, bankruptcy, foreclosure, missed payment, or high utilization on your credit card. There are many possibilities, so understanding your low score is the first step to fixing it.
Get your free credit report at annualcreditreport.com, and check for any errors. Reporting and removing mistakes can help your credit score, too.
Get a Cosigner
Finding a cosigner may help you qualify for refinancing if you’re already on the cusp. A cosigner promises to take responsibility for the loan payments if you default, so asking is a big deal. It should usually be someone you know well, like a parent or a spouse.
Banks are more likely to accept a less-than-stellar applicant with a cosigner because they have a backup option if the original borrower can’t afford the payments. Borrowing is all about proving your reliability to secure the best fixed and variable rates, and nothing makes a lender feel more confident than having an additional person tied to the loan.
Improve your Debt-to-Income Ratio
A low debt-to-income ratio will also help your case for refinancing. You can calculate that ratio by adding up your monthly minimum loan payments and dividing those by your monthly gross income. A 43% or less ratio is good, but lower is always better.
The most challenging criterion to overcome is income. A low income may disqualify you, even if your credit score is stellar and you have no other loans. The only way to fix this is by asking for a significant raise, getting a new job, or adding a part-time gig.
If you are self-employed or working as a contractor, you may have more trouble getting approved than someone in a more traditional employment situation. Getting a cosigner may be the only option if your income is too low to qualify.
Should I Refinance My Student Loans?
As always, consider the pros and cons of refinancing student loans. You’ll lose the perks of federal loans, such as access to PSLF, forgiveness, forbearance/deferment, and income-driven repayment plans if you have federal student loan debt. These include various repayment options, including student loan forgiveness, possible widespread loan forgiveness, income-based repayment plans, and generous deferment, forbearance, and discharge options in times of unemployment and economic hardship.
For high-interest private student loans, it could help you lower your interest rate and save money.
At Savingforcollege.com, 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.
