If you have a criminal conviction in your rearview mirror, you might think student loan refinancing is unachievable. After all, private lenders have strict eligibility requirements for borrowers seeking to lower their interest rate or monthly payment.
You might be surprised to learn, however, that refinancing with a criminal record is possible, though difficult.
Refinancing student loans with a criminal record
While many types of criminal offenses would limit your access to federal student loans, those convictions wouldn’t directly affect your ability to refinance with a private lender.
Student Loan Hero polled five leading refinancing lenders — Earnest, SoFi, EdVestinU, Splash Financial and CommonBond — and received a similar response from each. They’re most concerned with your employment, income and credit score, and they won’t perform the same background check that potential employers would. For example, the application doesn’t contain any box to check that can identify you as having been convicted of a felony or anything else.
CommonBond specified that it wouldn’t hold a criminal conviction against you — unless it included financial sanctions from a federal agency, like the Department of the Treasury.
A criminal record could complicate your eligibility
Nevertheless, a conviction could indirectly harm your chances of refinancing student loan debt. That’s because it could stop you from meeting other eligibility requirements.
Consider, for example, that slightly more than half (55%) of ex-prisoners find employment within a year of their release — and those who do find work only earn a median annual wage of $10,090, according to The Brookings Institution.
Both data points present problems for refinancing. Many reputable lenders heavily weight your employment status and earnings when evaluating your application. Some lenders impose minimum income requirements for prospective borrowers, including LendKey ($24,000), Education Loan Refinance ($35,000) and Splash Financial ($42,000).
But even if you have a steady, well-paying gig, you might find that your credit score isn’t up to snuff.
Although your credit score won’t account for any criminal history, it might be impacted in a roundabout way. Say you were incarcerated for an extended period and fell behind on your bills. In cases like these, your credit score likely took a dip beneath the solid score range that makes you eligible for refinancing, let alone the excellent score range that would unlock a lender’s advertised interest rates.
Regardless of your past, ensure refinancing is right for your future
A criminal record in and of itself won’t harm your eligibility for student loan refinancing. Your application will be judged traditionally, surveying your job, pay and credit file. Without strong financials, you could lean on a cosigner to improve your chances of qualifying or scoring the lowest possible interest rate.
If you’re unable to meet refinancing eligibility requirements (or find a cosigner who does), beware of predatory lenders tagging their refinancing products with high rates and fees. You might be better off taking the time you need to steady your career and improve your credit score in order to get a more reasonable refinancing offer.
Now that you’ve clarified your eligibility, review student loan refinancing basics to determine if it’s right for you.
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