Turned Down for Student Loan Refinancing? Here’s What To Do Next

The Consumer Financial Protection Bureau's 2023-24 Student Loan Borrower Survey revealed that 63% of borrowers had difficulty making their loan payments, with 37% missing at least one payment.

Although student loan refinancing can provide some repayment relief, it's not uncommon to be turned down for student loan refinancing. If you received a student loan refinance denial, here's what to do next, as well as refinancing alternatives to consider.

Current student loan refinance rates

What to do after being turned down for student loan refinancing

The first thing to consider after getting a refinancing rejection is whether your credit history and score met the lender's minimum requirements. Check your credit report for mistakes that could raise a red flag for refinance lenders.

“I've seen small, older accounts still listed as open on credit reports weigh heavily in underwriting, even though they're technically closed,” says Chris Keane, senior vice president of direct lending at Newfi Lending.

“Late payments on things like utilities or phone bills are another common trap,” he adds. “They may feel like a small issue, but lenders read them as signs of reliability issues.”

If you see an error, file a dispute with the appropriate credit bureau to have the incorrect data removed. “Even a small shift here can nudge your score enough to improve your chances,” says Keane.

You can also ask your lender to reconsider your refinancing application, especially if the denial was due to a lack of context or missing information. For example, if your initial application didn't show enough consistent income, but you have another income source that wasn't originally reported, you can reapply with the correct information.

To improve your likelihood of getting approved for student loan refinancing, shop around with a handful of top refinancing lenders. Each lender bases its loan decision on unique underwriting criteria, so prequalifying with a handful of lenders can improve your refinance application odds.

How to improve your student loan refinance application in the next few months

Although getting turned down for student loan refinancing shouldn't deter you from reapplying, consider making a few intentional changes first:

• Strengthen your credit score: The biggest factor influencing your FICO credit score is payment history, which accounts for 35% of your credit score. Making all of your credit payments on time every month can help boost your score.
• Lower your debt-to-income ratio: You can also lower your total outstanding debt to improve your refinancing eligibility. “The fastest way to move the needle is to pay down credit cards or personal loans,” says Joseph Camberato, CEO at National Business Capital. “When you're able to lower your balances, this has a major impact on your credit profile, sometimes within just a few weeks.”
• Add a creditworthy cosigner to your application: A cosigner with good to excellent credit can improve your odds of approval. Just remember that they must also meet all of the lender's eligibility requirements, and they'll be equally responsible for the loan.

Long-term strategies to overcome student loan refinancing denial

Building a glowing credit history takes time. Consider waiting until you've addressed your credit-related shortcomings or earn a higher income before reapplying for student loan refinancing. Not only will you position yourself favorably as a top candidate for a refinance, but you'll also fare better when applying for other new credit accounts.

Another strategy that spans a longer timeline is federal Direct Loan consolidation. You can consolidate eligible federal loans to simplify repayment and potentially access income-driven repayment plans if you weren't eligible before. This can help lower your monthly payment while you build your credit to qualify for better refinance terms down the line.

Alternatives to student loan refinancing if you've been denied

Student loan refinancing is a useful repayment strategy, but it's far from the only one. Here are some refinancing alternatives that offer a huge impact:

• Federal income-driven repayment (IDR) plans: Borrowers with qualifying federal student loans can enroll in an IDR plan. Payments are calculated based on a set percentage of your discretionary income and family size, and repayment terms are either 20 or 25 years, depending on the plan. This can easily lower your payments, and you don't need a specific credit score to qualify.
• Switch to another fixed repayment plan: Federal student loan borrowers who can't afford the Standard Repayment Plan's monthly payment can also switch to the Graduated Repayment Plan, which starts payments low and raises them every 2 years. Another option is the Extended Repayment Plan, which stretches the repayment term to 25 years, but you must have more than $30,000 in eligible loans to qualify.

Unfortunately, private student loans don't have the same safety nets as federal loans.

“For private loans, the safety nets look different. Hardship programs are out there, but they're typically short-term, like a few months of interest-only payments or temporary forbearance,” says Andreas Jones, certified financial education instructor (CFEI) and founder of KindaFrugal, which covers budgeting tips and other financial topics.

“That can help you through a rough patch, but it won't lower your balance, and it can increase your overall costs over time,” he explains. “Knowing these trade-offs up front puts you in a stronger position to make choices that protect both your finances and your future options.”