Can You Refinance Student Loans After Bankruptcy?

Refinancing student debt can be wise if you have high-interest loans. Depending on your credit, you could qualify for better interest rates than you have now and choose new repayment terms that fit your budget. 

If you have a history of bankruptcy, however, it could be more difficult to qualify for student loan refinancing. Most lenders require good or excellent credit to refinance student loans, and bankruptcy can damage your credit for seven years or more. 

Certain lenders may be willing to work with you, especially if it’s been a few years since you filed for bankruptcy. Read on for a closer look at your options for refinancing student loans after bankruptcy, including alternative strategies to manage your student debt. 

In this guide:

• Why is it difficult to refinance student loans after bankruptcy?
• Will any lenders refinance student loans after bankruptcy?
• Alternatives to refinancing student loans after bankruptcy

Why is it difficult to refinance student loans after bankruptcy?

If you borrowed loans to pay for college or graduate school, you might owe federal student loans, private student loans, or both. Federal loans come from the U.S. Department of Education and are eligible for various repayment plans and protections. On the other hand, private student loans come from private lenders, such as banks and credit unions. 

Both types of loans are difficult to discharge in bankruptcy, though private student loans may be easier. Either way, you may choose to refinance your student loans for new rates and terms. Refinancing student loans means exchanging one or more of your current loans for a new one from a private lender, ideally with better rates than you have now. 

It can be unwise to refinance federal student loans in certain situations. Transferring them to a private lender makes them ineligible for income-driven repayment plans, forgiveness programs, and other federal benefits. Even if refinancing is right for you, it can be challenging to qualify for refinancing after bankruptcy. 

When evaluating your application for student loan refinance, lenders review your credit history to assess your risk as a borrower. A bankruptcy on your credit report can be a significant red flag—in particular, if it’s recent. Plus, filing for bankruptcy can damage your credit score, making it difficult to meet a lender’s underwriting requirements for a refinanced student loan. Most lenders look for a credit score of 660 or higher to approve a refinance application. 

What type of bankruptcy is on your credit report?

Chapter 13 bankruptcy stays on your credit report for seven years. 

Chapter 7 bankruptcy stays on it for 10 years. 

The biggest difference between Chapter 7 and Chapter 13 is that Chapter 7 focuses on getting rid of unsecured debt, such as credit cards, personal loans, and medical bills. Chapter 13 allows you to catch up on secured debts, like your home or your car, while also discharging unsecured debt.

Education debt is notoriously difficult to discharge in bankruptcy, though it’s possible if a judge decides your debt causes undue hardship. 

In November 2022, the Department of Justice relaxed its rules around discharging student loans in bankruptcy, which could make it easier for debt-burdened borrowers to get a favorable ruling. 

Will any lenders refinance student loans after bankruptcy?

You’ll be hard-pressed to find a lender willing to refinance student loans after bankruptcy, especially if it’s recent. If it’s been seven years or longer since your bankruptcy, lenders might be more open to working with you. 

Student loan refinancing provider Earnest requests that no bankruptcy appears on your credit report when you apply. 

The team at Citizens Bank says it won’t discourage borrowers with bankruptcies from applying, but approval is unlikely. 

SoFi says a history of bankruptcy would reduce your chances of approval, but refinancing is possible if you’ve reestablished credit or demonstrated strong creditworthiness.

One way to boost your chances of approval is by adding a creditworthy cosigner to your application. In this case, your cosigner would share equal responsibility for the loan, and the lender would expect them to pay it back if you fall behind. 

Alternatives to refinancing student loans after bankruptcy

If you want to lower your federal student loan payments but can’t qualify for refinancing, your options include:

Income-driven repayment 

Income-driven plans adjust your monthly payments to a percentage of your discretionary income while extending your repayment terms to 20 or 25 years. Not only will you get a more affordable monthly bill, but you could get your balance forgiven if you still owe money at the end of your term. 

Deferment or forbearance 

Both deferment and forbearance postpone your payments temporarily. The downside, however, is your loans might accrue interest during this time, causing your balance to grow. 

A notable exception is the emergency forbearance that’s in place in response to the COVID-19 pandemic. Since March 2020, payments and interest have been paused on federal student loans. This program is ending as part of the debt ceiling deal just passed in June 2023.

The options above are available to borrowers with federal student loans. If you’re having trouble affording your private student loans, you’ll need to reach out to your loan servicer for options. Private loans aren’t eligible for federal repayment plans, but your servicer may be willing to adjust your terms or pause payments through forbearance. 

Speak with your lender about your options so you can find a solution before you miss payments and further damage your credit. 

Do I have private or federal student loans?

If you’re unsure whether your loans are federal or private, you can take these steps to find out. 

First, log into your account on the Federal Student Aid (FSA) website with your FSA ID and password. Your FSA dashboard will reveal your federal student loans, but it won’t show private student loans. 

To review your private loans, check your credit report. You can request this once every 12 months at no cost when you visit AnnualCreditReport.com. 

You can also reach out to your school’s financial aid office to see whether it has information on the student loans you borrowed.