Can you refinance your student loan if you haven’t graduated?

You’re stuck with all the student loans you’ve taken out, whether you have a degree or not, so paying them off should be a priority. One of the tools you have is student loan refinancing, which can make your payments more affordable and help you pay off student debt faster.

The only problem? Not all lenders allow student loan refinancing if you haven’t graduated. Here’s what you need to know about student loan refinancing without a degree.

You can consolidate or refinance student loans to make them more manageable.

Student loan consolidation involves taking out a consolidation loan directly through the federal government and combining two or more federal student loans into one. The interest rate is a weighted average, rounded to the nearest eighth of a percent. Consolidation may be required to enroll in some federal student loan repayment programs, such as income tested.

Refinancing, on the other hand, involves taking out a new loan from a private lender and using the funds to pay off one or more existing loans. Usually, the goal of refinancing is not only to consolidate student loan debt, but also to lower the interest rate. Borrowers can also choose a shorter or longer repayment term, depending on their goals. While you can refinance federal and private student loans, the refinancing process definitely makes all of your loans private.

For this reason, you must carefully weigh the option of refinancing federal loans. This means you lose all federal protections and benefits, including eligibility for public service loan forgiveness, income-based repayment options, deferral, and forbearance.

When it comes to refinancing when you haven’t actually graduated from college, your eligibility will depend on the policy of the individual lender.

“Many private consolidation loans are not available to students who have not graduated because dropping out of college is a good predictor of default,” says Mark Kantrowitz, editor and vice president of research at Savingforcollege.com. “Students who drop out are four times more likely to default on student loans than graduate students and account for two-thirds of defaults.”

But that doesn’t mean you’re out of luck. Some private lenders allow borrowers without a degree to refinance if they meet certain eligibility conditions.

First of all, you will need to meet the general refinancing requirements of the lender. Alyssa Schaefer, Marketing Director of Laurel Road, an online loan company that offers student loan refinancing and other services, says, “While some refinance lenders do not require a college degree, borrowers should still meet the eligibility criteria. ”

For example, she says that attending a school that offers federal student aid (Title IV school), a stable financial history, sufficient income, and a good credit rating are usually necessary.

To increase your chances of qualifying for refinancing without a degree, Kantrowitz suggests the following:

Although lenders generally follow certain general refinancing requirements, each lender can set their own requirements for refinancing student loans. You can usually find the eligibility requirements online with the lender or on the application. “It’s important that borrowers do their homework to understand where they can qualify,” Schaefer says.

Here is an overview of some of the major lenders’ policies for refinancing student loans:

If you can’t qualify to refinance your student loans, all is not lost. There are a few steps you can try to improve your odds, as well as alternatives to refinancing that you can consider.

Improve your credit. “In most cases, the better the credit score, the more financing options you have,” says Schaefer. If you don’t qualify for refinancing because of your credit, spend time improving your score before you reapply. This can include paying bills on time and paying off other unpaid debts such as credit cards.

Apply with a co-signer. If you have a trusted friend or family member who qualifies for their own refinance, consider applying for refinancing with them as a co-signer. Again, remember that the co-signers share the same responsibility in repaying the loan, so you should only go with a co-signer if you are confident that you can afford to make all the payments on time.

Adhere to income-based reimbursement. If you have federal student loans, refinancing may not even be the best option available. “Federal student loan borrowers can get a direct federal consolidation loan even if they haven’t graduated,” Kantrowitz says. “However, a better option for these borrowers might be to obtain an income-based repayment plan, which bases the monthly payments on income.”

Seek forgiveness. There are several programs that will forgive some or all of your student loan debt if you qualify. Income-oriented plans, for example, will write off any remaining debt after the repayment period has passed. There are also career-oriented student loan forgiveness programs, such as the Public Service Loan forgiveness program. Find out about the types of programs that exist for the field in which you specialize. However, keep in mind that debt relief under some programs is considered taxable income, so talk to a tax professional about the impact of debt relief on your finances.

Consider completing your degree. Finally, if it is financially possible for you to go back to school and complete your education, it might be worth pursuing. Not only will you improve your employment prospects and you will be more likely to get a higher income, but you will also improve your eligibility for refinancing later on. Of course, taking on more debt to complete your degree just so you can refinance later is probably not worth it.