Can You Refinance Your Student Loan if You Have Been Defaulted?

If you have been defaulted on your student loan, it can be a very stressful situation. It can cause financial problems and even impact your credit score. Luckily, there is some good news for those who have been defaulted on their loans. You may be able to refinance them into another one that has a lower interest rate and more manageable terms than the original one did when you took it out for school.

What Is A Student Loan Refinance?

A student loan refinance is the process of taking out a new loan to pay off your current student loans. This can be done for several reasons, including:

• To lower your monthly payments.
  
• To refinance your private student loans and federal student loans into one with better rates and terms which is called consolidation.
  
• To achieve better repayment terms or periods based on credit history and income level.

How Does Student Loan Refinancing Work?

If you have not defaulted on a student loan and are currently in good standing, then refinancing is possible. If you have defaulted on a student loan, then chances are that refinancing your student loans is not an option for you. However, it may be worth checking out if your lender offers a co-signer release program or if they offer their own version of forbearance that allows for payments to resume after being suspended for several months.

If you have good credit and no outstanding debts (including credit cards), it’s likely that refinancing will be available to you with little to no difficulty at all. At SoFi, they offer cosigner release to borrowers who have made 24 months of on-time payments in a row; however, borrowers must still pass an underwriting review and meet all other requirements.

What Are The Advantages Of Refinancing?

Refinancing your student loan has several benefits, including:

• Lower monthly payments and interest rates. This is the biggest advantage of refinancing since it can help you pay off your debt faster.
• If you have private student loans, refinancing can help you consolidate them into one loan with a lower interest rate. It’s also helpful if you want to get rid of private loans altogether and only have federal ones because they’re typically better in terms of repayment options and financial aid eligibility requirements (most federal loans are eligible for forgiveness after 10 years).
• Refinancing could give you access to more flexible repayment plans than what was available when the original lender issued the loan (for example, allowing for lower monthly payments during school or forbearance periods).

Can I Refinance My Defaulted Student Loans?

If you are in default on your student loan, it is possible to refinance with a new lender. However, the interest rate will be much higher than if you were not in default. If you have good credit and can get back into good standing with the Department of Education (DOE), then it may be worth it to pay off your defaulted loans in order to take advantage of lower rates.

If you cannot get out of default, but would still like to refinance through another lender or through the DOE itself, there are options available for both federal and private lenders that can help find better rates while still maintaining repayment plans designed around your needs and budget.