Being denied student loans can be frustrating—especially if you have no other way to pay for school. Unfortunately, it’s common for would-be borrowers to be denied loans, and there are a number of factors that could lead to loan denial.
Your credit history, current credit score, insufficient application information, or a whole host of other issues could cause you to be rejected for a loan.
If you were denied a student loan, you still have options. This guide will show you some of the steps you can take when your loan application is denied.
In this guide:
- What to do if you’re denied a federal student loan
- What to do if you were denied a private student loan
- What to do if you don’t qualify for a loan
- Best practices for applying for student loans
What to do if you’re denied a federal student loan
Federal student loans might be the first place you look for financial aid for school, since they offer low fixed interest rates and flexible repayment options. If you’re wondering: can you be denied a federal student loan, the answer is yes. Even if you complete the Free Application for Federal Student Aid (FAFSA), approval is not always guaranteed.
If you’ve applied for federal student loans and have been denied, it’s important to understand the reason for denial. That can help you to determine what steps to take next and whether it may be possible to become eligible for federal aid.
Why you may have been denied a federal student loan
If you’ve been denied student loan funding through the Department of Education, it’s possible that you failed to meet eligibility requirements for federal loans. To qualify for federal student loans, you must:
- Demonstrate financial need (for most loan programs)
- Be a U.S. citizen or eligible noncitizen
- Have a valid Social Security number (exceptions are made for students from the Republic of the Marshall Islands, Federated States of Micronesia, or the Republic of Palau)
- Be enrolled or accepted for enrollment as a regular student in an eligible degree or certificate program
- Enroll at least half-time (for Direct Loan eligibility)
- Maintain satisfactory academic progress
- Certify that you are not in default on a federal student loan, do not owe money on a federal student grant, and will use the loan only for educational purposes
- Show that you’re qualified to obtain a college or career school education because you’ve completed high school or a GED program
At one time, males were required to register with Selective Service to be eligible for federal aid. Your registration status no longer affects your ability to qualify for loans. Your criminal record can, however, result in being denied a student loan.
If you’re incarcerated in a federal or state institution you are not eligible for federal student loans or federal Pell grants. You may be eligible for federal student loans if you’re on probation or parole, or are living in a halfway house. Drug convictions no longer affect federal student loan eligibility.
You may be denied Direct PLUS loans if you have an adverse credit history. PLUS loans are made to eligible parents, graduate students, and professional students. An adverse credit history means that you have certain negative items on your credit reports, such as:
- Accounts that are delinquent, charged-off, or in collections
- Accounts in default
- Recent bankruptcy discharge
- Recent repossession or foreclosure
- Wage garnishments or tax liens
Again, you can be denied any federal student loan if you’ve defaulted on a federal loan previously. The good news is that while there are numerous reasons you might be denied student loans, there are ways to remedy the situation.
What are potential solutions?
Your Student Aid Report (SAR), which is issued after you complete the FAFSA, provides estimates of your aid eligibility. You can access this report online if you have a Federal Student Aid (FSA) ID. If you’ve been denied student loan funding at the federal level, the Department of Education should explain the reason to you.
The potential solutions available will depend on the reason you were denied student loans. For example, some of the options include:
- Apply for loan consolidation or rehabilitation to bring federal loans out of default
- Become a citizen or obtain eligible noncitizen status, if possible
- Obtain an endorser or provide documentation of extenuating circumstances pertaining to your adverse credit history if you’ve been denied PLUS loans
- Pay off any debts to remove judgment liens
- Improve your GPA or take additional courses to meet your school’s requirements for satisfactory academic progress
If you don’t see a solution that fits your situation, you can talk to your school’s financial aid office about other possible options. Your financial aid counselor can review your situation to see if any additional courses of action are available to help you regain your student loan eligibility.
What to do if you were denied a private student loan
Private student loans are offered by private lenders who can establish their own eligibility requirements. It’s entirely possible to be denied a private student loan if you don’t meet those requirements. You could even be denied a student loan with a cosigner.
As with federal student loans, it’s important to understand the reasons for the denial. Knowing why you’ve been denied can help you figure out what steps to take next.
Why you may be denied private student loans
Unlike most federal student loans, private student loans typically require a credit check. Specifically, private student loan lenders can look at both your credit reports and your credit scores to determine whether you qualify for a loan.
Having no credit or bad credit is common for students who are entering college, but it can lead you to be denied for private student loans. Aside from credit, private lenders can also deny you student loans for other reasons. For example, you may be denied based on:
- Income. Lenders want to know that borrowers can repay the loans they take out. You could be denied a student loan if you lack sufficient income.
- Employment history. Your employment history may also come under scrutiny. If you have a short work history or don’t have a job, that could work against you for private student loan approval.
- Debt-to-income (DTI) ratio. Your debt-to-income ratio represents how much of your income goes to debt repayment each month. If a substantial part of your income goes to other debts, private lenders may be reluctant to give you a loan.
Private student loan lenders may also base approval decisions on your field of study, which school you’re attending, and residency status. While some lenders offer private student loans for international students, DACA recipients, and immigrants, not all of them do.
Many private lenders recommend having a cosigner when applying for loans, but approval isn’t always a lock. You may be denied student loans with a cosigner if that cosigner doesn’t meet the lender’s eligibility requirements. In that case, you may need to find another cosigner who is creditworthy or try to get approved based on the merits of your credit alone.
What are potential solutions?
Getting denied for private student loans can be unpleasant but there are things you can do to strengthen your applications to avoid future denials.
First, you can look for someone with a strong credit history to act as your cosigner. You could ask a parent, relative, spouse, or even a friend to cosign for your loans. The better your cosigner’s credit history, the more likely you are to be approved and the lower your rates may be.
Keep in mind that cosigning splits the responsibility for the loans. If you default, the lender may come after the cosigner for repayment and their credit scores may take a hit. So it’s important to choose a cosigner who not only has a good credit history but is comfortable accepting this risk.
Next, you can work on improving your own credit scores, which can make it easier to get approved for private student loans. Some of the best ways to improve credit scores include:
- Make payments to monthly bills on time, especially to debt accounts that report to the credit bureaus
- Check your credit reports for errors and dispute any mistakes or inaccuracies you find
- Reduce existing debt levels if you owe balances on credit cards, loans, or other lines of credit
- Get a secured credit card to build a credit history if you have a thin credit file
Remember that every private lender is different when it comes to who they’re willing to approve for loans. So it’s important to shop around to compare eligibility requirements as well as the loan rates and terms being offered. There are lenders that may offer loans to students with poor credit, though you may pay a higher interest rate to borrow.
What to do if you don’t qualify for a loan
If you’ve applied for federal and/or private student loans and been denied for both, you may have other options for paying for school. Some of the avenues you might explore for financial aid include:
- Scholarships. Scholarships can provide free money for school. Some are merit-based; others are need-based. You can search for scholarships online or visit your school’s financial aid office to see if there are any school-specific options available.
- Grants. Like scholarships, grants can also give you free money to pay for school. In most cases, grants are need-based, rather than merit-based. You can apply for federal Pell grants by completing the FAFSA and search online or contact your school’s financial aid office for other grant opportunities.
- Work study. Work study programs allow you to earn money to pay for school in exchange for working in an approved setting. You can apply for federal work study by completing the FAFSA. Depending on your field of study, you may be able to find work study programs offered by private employers. For example, some hospitals offer work study programs to help pay for nursing school.
You’re not limited to just one of these financial aid options. The more scholarships, grants, and work study opportunities you apply for, the more funding you might be able to obtain for school.
Best practices for applying for student loans
If you know that you’ll need student loans to pay for college, it’s important to understand what type of loans you’re applying for and what you’ll need to qualify. That can help you take any preemptive actions to raise your approval odds, such as boosting your credit scores or getting federal loans out of default.
When applying for student loans, it’s helpful to start with federal loans first. Federal loans offer benefits that private student loans do not, including income-driven repayment options and the possibility for loan forgiveness. Remember that you’ll need to resubmit the FAFSA each year to get the maximum amount of federal aid possible.
Your best resource for finding financial aid may be your school. The financial aid office should be able to give you more specific information about different funding options, how to apply for them, and what to do if you’ve been denied for federal student loans.
If you need extra time to address any issues that are keeping you from getting approved for student loans, you can still take part-time classes. You may need to pay for those classes out of pocket if you don’t qualify for aid yet. But that can be a good way to keep your education on track until you become eligible for loans.
Learn more: How student loans work
If you were denied a student loan on your own, ask a creditworthy person in your life to apply for a loan with you as a cosigner—someone who signs for the loan with you. A cosigner with good credit may be able to help overcome your limited or negative credit history so that together you qualify for the loan.What can I do if my student loan is denied? ›
If you were denied a student loan on your own, ask a creditworthy person in your life to apply for a loan with you as a cosigner—someone who signs for the loan with you. A cosigner with good credit may be able to help overcome your limited or negative credit history so that together you qualify for the loan.What happens if student loan forgiveness is denied? ›
You will remain responsible for repaying your loan according to the terms of the promissory note you signed. You should talk to your loan servicer about repayment options if you have a Direct Loan or Federal Family Education Loan Program loan.Can I accept student loan after I declined? ›
Once your decline request has been submitted or your accept request has been submitted and sent to the Department of Education, you must contact the Financial Aid Office to request any changes. the box by each loan you want to accept. You may then reduce the amount if you wish.Why am I not eligible for student loans? ›
Students must be in good academic standing to receive federal aid. The required GPA varies from school to school, but typically students need a 2.0 or higher. If your grades fall below the minimum GPA, you could lose eligibility for financial aid.Will Biden forgive student loans? ›
Biden's overall plan to forgive federal student debt is estimated to cost over $400 billion. The administration has proposed discharging up to $10,000 in debt for those earning less than $125,000 a year or couples who file taxes jointly and earn less than $250,000 annually.Is Sallie Mae hard to get approved for? ›
Minimum credit score: mid-600's. Minimum income: No income minimum. Typical credit score of approved borrowers or co-signers: 749.Why do so many people get denied PSLF? ›
The Biggest PSLF Errors That Cause Loan Forgiveness Denial
Failing to submit your Employment Certification Form (ECF) each year. Making mistakes on your ECF. Not consolidating your ineligible loans. Not being in an income-driven repayment (IDR) plan.
Most forgiveness programs require years of repayment before you can qualify; depending on the plan, you could be in debt for 25 years before you get forgiveness. Debt cancellation also isn't guaranteed, and there's a risk that you complete your obligations but are still ineligible for another reason.Why do I not qualify for loan forgiveness? ›
The loan payments must have been made on time, within 15 days of the due date. Late payments do not count. Partial payments do not count. The borrower must not be in default on their federal loans.
Applying for a loan will impact your credit rating. This is because the application involves a hard credit search. However, the search won't say if you were accepted or refused, so a loan rejection won't damage your credit score any more than an approval.Can you appeal a student loan denial? ›
If you get an adverse credit result, you may be able to file an appeal to ask for additional review.When can I apply for a loan after being declined? ›
You should wait at least 30 days before applying again, but experts recommend waiting six months to give yourself the best chance of qualifying. While you are waiting to reapply, you should work on resolving the reason for your loan denial.How do I pay for college if I get denied financial aid? ›
- Address your eligibility.
- Consider filing a financial aid suspension appeal.
- Apply for grants and scholarships.
- Take out private student loans.
- Work your way through college.
- Ask for help.
In terms of Federal Student loans (which should be your first pick of the two options: federal and private), there is a requirement that a student must have at least a 2.0 GPA when taking out a loan—and that they maintain a minimum of a 2.0 while still in school.Why did FAFSA give me nothing? ›
There are a number of possible reasons why you might have been told no aid is available: Your FAFSA may be incomplete. If you failed to submit any information on your FAFSA, then the school may not have determined yet what types of aid you are eligible for.Can I get a Sallie Mae loan with a 600 credit score? ›
To qualify for a student loan with Sallie Mae, you must have a credit score in the mid-600s. They're a good option for students seeking competitive interest rates with a creditworthy cosigner.What credit score do I need for Sallie Mae? ›
The average credit score for approved Sallie Mae borrowers is around 748 for undergraduate student loans. That's pretty high – but don't panic if your credit score is much lower than that. You'll need a minimum credit score (or have a cosigner with a minimum credit score) that is somewhere in the mid-600s.What GPA do you need for Sallie Mae? ›
All students applying to a Federal loan program must have a minimum GPA (usually 2.0 or higher), they must be a U.S. Citizen or legal resident, they must fall within the required income bracket and they must be able to prove that they have not defaulted on any prior loans.What is the downside to PSLF? ›
Potentially the most significant drawback of student loan forgiveness is the taxes. With a few exceptions, including PSLF, the IRS considers the amount of your forgiven balance to be taxable income. Depending on how much is forgiven, that could amount to tens of thousands of dollars you owe in taxes.
There are no income limits for the PSLF program. However, if your income is high relative to the balance of your student loans, you might not qualify for an income-driven repayment (IDR) plan.How many people actually qualify for PSLF? ›
From Oct. 6, 2021, through Oct. 31, 2022, the U.S. Department of Education (ED) implemented a change to PSLF program rules for a limited time as a result of the COVID-19 national emergency. As of mid-April 2023, approximately 616,000 borrowers have qualified for forgiveness under the limited PSLF waiver.How many students regret student loans? ›
Some 31 percent of respondents said their choice of major was their biggest regret from college, with 28 percent regretting taking on student debt to fund their education. One in five regretted dropping out of college.How do I know if my student loans will be forgiven? ›
Who qualifies for student loan forgiveness? To be eligible for forgiveness, you must have federal student loans and earn less than $125,000 annually (or $250,000 per household). Borrowers who meet that criteria can get up to $10,000 in debt cancellation.Is there a way to get student loans forgiven? ›
Public Service Loan Forgiveness
PSLF forgives the remaining balance on your Direct Loans after you have made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
Here's how many borrowers have seen their debts discharged through PSLF: 8.05% of all PSLF and TEPSLF applications have been approved, according to October 2022 data from the Department of Education (233,320 approved for discharge among 2,897,797 total applications).Who qualifies for Biden student loan forgiveness? ›
Eligibility for Biden's Student Loan Cancellation Plan
You must earn less than $125,000 a year for individuals, or $250,000 for married couples and/or head of households.
Loans from these federal student loan programs don't qualify for PSLF: the Federal Family Education Loan (FFEL) Program and the Federal Perkins Loan (Perkins Loan) Program. However, they may become eligible if you consolidate them into a Direct Consolidation Loan.How long does a denied loan stay on your credit report? ›
That is why it is always recommended to wait for some time after you get rejected to apply for another loan. Also, it is important to note that hard inquiries like declined loans can stay on your credit file for up to five years before they are removed from your history.Does loan rejection affect credit score? ›
When a bank or credit institution makes an inquiry, it is known as a hard inquiry. A hard inquiry downgrades your CIBIL score; hence, you should avoid multiple loan applications from different banks simultaneously, as every rejection will further reduce your CIBIL score.
Experian, for example, uses a range from 0 to 999. A score of between 881 and 960 is good, between 961 and 999 your score is excellent.Can a loan denial be reversed? ›
Contest the lender's decision: If you believe you were wrongfully denied a loan, lodge a complaint with the lender. The lender could reverse the decision.Can I apply for financial aid after being denied? ›
You need to make satisfactory academic progress in college or career school in order to keep getting federal student aid. Talk to your school about whether you can appeal the decision that made you ineligible to continue receiving federal student aid.How do I fight student loans? ›
- Qualify For A Federal Student Loan Forgiveness Program.
- Find State Assistance For Your Student Loans.
- Find Out If Your Employer Offers Tuition Reimbursement.
- Consolidate Your Federal Student Loans.
- Find A Repayment Plan That Matches Your Ability To Pay.
- 1.Low Credit Score. After you apply for a personal loan, one of the first things the lender will do is to check your credit score. ...
- 2.Low Income. ...
- 3.Inaccurate Details in Application. ...
- 4.Job Instability. ...
- 5.Too Many Pending Loans. ...
- 6.Not Eligible.
- Identify the Reason for the Loan Denial. ...
- Review Your Credit Report. ...
- Boost Your Credit Score. ...
- Pay Down Debt. ...
- Increase Your Income. ...
- Consider Other Ways To Get a Loan.
Debt-to-income ratio of 42% to 49%
DTIs between 42% and 49% suggest you're nearing unmanageable levels of debt relative to your income. Lenders might not be convinced that you will be able to meet payments for another line of credit.
- Step 1: Contact Your School's Financial Aid Office. ...
- Step 2: Determine How Much You Need. ...
- Step 3: Gather Any Necessary Documentation. ...
- Step 4: Write a Financial Aid Appeal Letter. ...
- Step 5: Submit Your Letter and Any Other School-Specific Forms.
Yes, financial aid is negotiable. “There is very little downside to asking, so you might as well make the request,” says Shannon Vasconcelos, a college finance educator at College Coach. She estimates that negotiations are successful in about half of the cases she's seen, so it's worthwhile to put the effort in.How do I cope with not affording college? ›
- Fill out the FAFSA. ...
- Apply for Grants. ...
- Search for Scholarships. ...
- Consider a Work-Study Program. ...
- Pick a Different School. ...
- Commute to College. ...
- Explore Student Loan Options. ...
- Look Into Tuition Payment Plans.
You're not making satisfactory academic progress at your school. You've defaulted on an existing federal student loan. You owe a refund on any previous federal grants. You're enrolled in an academic program that makes you ineligible for funding.What GPA is too low for financial aid? ›
To be eligible for federal student aid and college financial aid, a student must be making Satisfactory Academic Progress (SAP). This generally consists of maintaining at least a 2.0 GPA on a 4.0 scale (i.e., at least a C average) and passing enough classes with progress toward a degree.What credit score do you need for federal student loan? ›
Federal: There are no minimum credit score requirements for federal student loans. Though there is a credit history check for federal PLUS loans. Private: A credit score of at least 670 is typically required, though specific requirements may vary from lender to lender.Why am I not eligible for a Pell Grant? ›
Once you have earned a baccalaureate degree or your first professional degree or have used up all 12 terms of your eligibility, you are no longer eligible to receive a Federal Pell Grant. Learn more about staying eligible for federal student aid while you're in school.Can I ask colleges for more financial aid? ›
Answer: Yes, you can absolutely ask a college for more merit aid. In fact, many of your peers will do so. And since this type of aid is given on a first-come, first-served basis, you will want to submit your request as soon as possible.Is everyone guaranteed FAFSA? ›
All college students attending eligible schools qualify to submit the Free Application for Federal Student Aid, or FAFSA. You're likely to get some kind of aid if you apply, but you may not be eligible for all types.How to pay for school if you can't get a loan? ›
- Address your eligibility.
- Consider filing a financial aid suspension appeal.
- Apply for grants and scholarships.
- Take out private student loans.
- Work your way through college.
- Ask for help.
Getting rejected for a loan or credit card doesn't impact your credit scores. However, creditors may review your credit report when you apply, and the resulting hard inquiry could hurt your scores a little. Learn how to wisely manage your next application and avoid unnecessary hard inquiries.What credit score is needed for a student loan? ›
So, you can understand why most lenders require a minimum credit score between 600 and 700 to be approved for a private student loan. If you don't have a credit score over 600, you'll likely need to add a creditworthy cosigner to your loan.How successful are financial aid appeals? ›
Appeals aren't always successful —- my success rate for my clients is a little more than 50 percent. But by using these tips, you can increase your chances of success right from the start.
Under the Equal Credit Opportunity Act, you have the right to ask your lender why it rejected your application, as long as you ask within 60 days. After you request an explanation, the lender must provide you with a specific reason for your denial. You can use the information it gives you to help fix any issues.What happens if you don t have enough money to pay for college? ›
Grants, work-study, loans, and scholarships help make college or career school affordable. Financial aid can come from federal, state, school, and private sources to help you pay for college or career school. Learn more about the different types of financial aid.How do people pay for college without loans? ›
Apply for scholarships.
Scholarships are one of your family's most powerful tools in the journey to cover school without loans because they're funds you earn and never have to pay back.
If you received federal student loans but don't plan on returning to school, you have a 120-day window to cancel a loan disbursement before you're liable for the money. Private student loan companies have their own requirements, so it's important to check with your lender.How many hard inquiries is too many? ›
There's no such thing as “too many” hard credit inquiries, but multiple applications for new credit accounts within a short time frame could point to a risky borrower. Rate shopping for a particular loan, however, may be treated as a single inquiry and have minimal impact on your creditworthiness.How many points is a hard inquiry? ›
How does a hard inquiry affect credit? While a hard inquiry does impact your credit scores, it typically only causes them to drop by about five points, according to credit-scoring company FICO®. And if you have a good credit history, the impact may be even less.Can you get a student loan with a 600 credit score? ›
What credit score do you need for a student loan? Federal: There are no minimum credit score requirements for federal student loans.What is the minimum credit score for Sallie Mae? ›
The average credit score for approved Sallie Mae borrowers is around 748 for undergraduate student loans. That's pretty high – but don't panic if your credit score is much lower than that. You'll need a minimum credit score (or have a cosigner with a minimum credit score) that is somewhere in the mid-600s.Is it hard to get approved for student loan? ›
It can be incredibly difficult to get a private student loan with no or bad credit from large financial institutions. Most large banks and student loan lenders have very strict underwriting criteria. The criteria dictate who qualifies for a loan, what rates they receive, and how much they can borrow.