Refinance after Chapter 13

[Hall8]

Hello - I completed my 5 year chapter 13 payment plan last year. Following that, I still have my student loan debt which is quite substantial at a little over $200,000. I got a secured card once my plan was up and recently was able to get a mortgage through a lender that did manual underwriting. So, I tried to refinance my student loans which mostly have 14% interest with Mohela. However I was denied. I'm thinking it may be because my bankruptcy doesn't fall off until March 2026, would this be a correct assumption? Also, is there anything else I can do until then to increase my chances of refinancing at lower rates? 

TU is 736 and Equifax is 753

[Horseshoez]

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@Hall8 wrote:

Hello - I completed my 5 year chapter 13 payment plan last year. Following that, I still have my student loan debt which is quite substantial at a little over $200,000. I got a secured card once my plan was up and recently was able to get a mortgage through a lender that did manual underwriting. So, I tried to refinance my student loans which mostly have 14% interest with Mohela. However I was denied. I'm thinking it may be because my bankruptcy doesn't fall off until March 2026, would this be a correct assumption? Also, is there anything else I can do until then to increase my chances of refinancing at lower rates? 

TU is 736 and Equifax is 753

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The refi could very well be due to your bankruptcy notation; your scores are a bit higher than mine were when I had nine or so months left with my Chapter 13 showing.  Immediately after the notation dropped off my reports, my scores all popped from the high-600s through low-700s, in to the 800s.  Things will get much easier for you come next  March.

[Hall8]

Thank you for the information. Is there anything else I can do between now and then to increase my chances of an approval for refinancing and getting the lowest possible interest rate?

[Horseshoez]

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@Hall8 wrote:

Thank you for the information. Is there anything else I can do between now and then to increase my chances of an approval for refinancing and getting the lowest possible interest rate?

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The best advice would be to sit on whatever credit you have now and then:

1. Apply after your Chapter 13 falls off your records
2. Apply after your most recent application for credit ages to 1-year
3. Prior to your refi application, practice AZEO (also known as AZE1)

Doing the above will get you your best possible scores.

[Realist]

I'm not sure how I missed this adding this late, but I have to ask, with 200k in student debt, is your field of study or profession expected to earn an exceptional rate or salary?  Is there a reasonable path forward to actually pay off these kinds of debt?  It's nearly like owning a home payment, without owning a home.

We've put a few people through, earning as high as a Masters in finance, and another in IT, for only a fraction of that total.  The return earned dividends immediately, making college debt a non-issue at all.  25k total and less, $200 per month in expense, offset by their large salaries.

If I can ask, what does a 200k student debt purchase?

[Horseshoez]

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@Realist wrote:

I'm not sure how I missed this adding this late, but I have to ask, with 200k in student debt, is your field of study or profession expected to earn an exceptional rate or salary?  Is there a reasonable path forward to actually pay off these kinds of debt?  It's nearly like owning a home payment, without owning a home.

We've put a few people through, earning as high as a Masters in finance, and another in IT, for only a fraction of that total.  The return earned dividends immediately, making college debt a non-issue at all.  25k total and less, $200 per month in expense, offset by their large salaries.

If I can ask, what does a 200k student debt purchase?

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Interesting question; we put our daughter through a Masters in Applied Economics with a total of about $19,000 in student debt, which I just paid off last month.

[Thomas_Thumb]

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@Realist wrote:

I'm not sure how I missed this adding this late, but I have to ask, with 200k in student debt, is your field of study or profession expected to earn an exceptional rate or salary?  Is there a reasonable path forward to actually pay off these kinds of debt? 

If I can ask, what does a 200k student debt purchase?

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The debt exists and will need to be dealt with. Key point is to minimize interest rate so payments can be managed with even a "modest" sub $100k salary.

As mentioned above, the BK falling off is critical for boosting score to secure a significantly lower refi rate. Perhaps  a 6.99% apr without the BK in combination with newest account aging to 12 months and implementation of AZE1.

It is important to have an open revolving account to boost score associated with mix. It matters not if the card is secured or unsecured. What does matter is to have a revolving account to report a small statement balance (AZE1). This avoids the "no recent revolving account activity" penalty which is typically 15-25 points. The reported balance should be less than 9% of the card's CL given you only have the 1 card. That will optimize score relative to aggregate revolving utilization.