Only a few lenders will refinance student loans if you haven’t earned a degree.
Compared with degree-holders, borrowers who drop out of college are more likely to default on their loans, according to federal data analyzed by the Center for American Progress, a public policy research organization.
But if you’re making payments on time and have a good credit score and a stable job, you may find that you can refinance your loans at a lower interest rate. That could reduce your payments or allow you to pay off the loans more quickly.
How refinancing can save you money
Refinancing can save you money by replacing your current debt with a new, lower-rate loan through a private lender.
For example, refinancing $30,000 in student debt from an annual percentage rate of 8% to 5% could drop a monthly payment from $364 to $318 and reduce interest paid by $3,500. Or you could keep payments the same as before and be debt-free 20 months sooner.
You can refinance both federal and private student loans.
If you have federal loans, there’s a downside to refinancing with a private lender: You forfeit your rights to federal loan repayment options, such as income-driven repayment and public service loan forgiveness.
Qualifying for refinancing
Although some refinancing lenders don’t require you to have a degree, you still need to meet certain qualifications.
You usually have to have attended a school that offers federal student aid, known as a Title IV school, even if you didn’t graduate.
Lenders will assess your credit score, which will have to be in the high 600s or higher. They’ll also want to make sure you have a stable financial history and a healthy income. Borrowers with higher incomes have an easier time getting approved for refinancing and tend to get the best interest rates.
If you don’t meet these qualifications, you’ll need a co-signer who does. Consider lenders that offer a co-signer release, which allows your co-signer to get off the hook for your debt after a certain period of on-time payments.
If you don’t qualify for refinancing
If you can’t qualify for refinancing and are having trouble making payments on federal loans, apply for an income-driven repayment plan. These plans cap payments at a percentage of your income and extend repayment length.
To enroll in an income-driven plan, you may need to first consolidate your federal loans into one new federal direct loan. Consolidation won’t lower your interest rate like refinancing does. However, it could lower payment amounts by extending the repayment term.
If you have private loans that you can’t refinance, contact your lender to see what repayment options are available to struggling borrowers. You may be able to renegotiate the terms of your loan or lower payments for a period of time. Lenders also usually offer hardship forbearance, which halts payments on loans temporarily while interest continues to build.