What To Do If You’re Denied a Student Loan: Next Steps

Heading to college often means borrowing money to cover tuition and other expenses — and many students do. During the 2023-24 school year, half of all undergraduates relied on student loans, according to the College Board. While most students qualify for federal loans by meeting basic eligibility requirements, private loans can be trickier — especially for borrowers without a strong credit history.

In this guide, we cover the reasons why you might be denied a student loan and what to do next.

Current private student loan rates

Why was my student loan application denied?

Federal and private student loans have different eligibility requirements, so the reasons for being denied can vary depending on the type of loan.

If you were denied federal Direct Loans

While federal Direct Unsubsidized and Subsidized Loans are usually more accessible than private student loans, they do come with eligibility requirements, and you could be denied a federal Direct Loan for a number of reasons, including:

• You're not a U.S. citizen or eligible noncitizen (DACA students aren't eligible for federal student loans).
• You don't have a valid Social Security number (some exceptions apply).
• You didn't fill out the Free Application for Federal Student Aid (FAFSA).
• You fell below at least half-time enrollment status.
• Your degree or certificate program isn't eligible for federal aid.
• You've defaulted on a federal student loan.
• You can't prove you have a high school diploma or state-recognized equivalent such as a GED.
• You aren't making satisfactory academic progress at your college.
• You're incarcerated in a federal or state facility.

If you were denied federal Direct PLUS Loans

Federal Direct PLUS Loans for parents and graduate students require a credit check in addition to meeting general federal student aid eligibility requirements. If you were denied a grad PLUS or parent PLUS loan, it's likely because of an adverse credit history.

You're considered to have an adverse credit history if any of the following apply:

• You have one or more debts with a combined outstanding balance greater than $2,085 that are 90 or more days delinquent, in collections, or charged off within the past 2 years.
• You've experienced loan default, discharge of debts in bankruptcy, foreclosure or repossession, a tax lien, wage garnishment, or a write-off of federal student aid debt within the past 5 years.

See Also: No-Credit-Check Student Loans

If you were denied a private student loan

Private student loan lenders typically evaluate your credit score and income when considering your application. Since most new college students don't have an established credit history, lenders often require a cosigner with good credit. In fact, 92% of undergraduate borrowers apply for private student loans with a cosigner, according to a 2024 Enterval Analytics report.

If you're not a new borrower, your denial might be due to issues like errors on your credit report, such as incorrect balances, outdated information, or accounts you don't recognize.

Additionally, some private lenders, such as College Ave and ELFI, require borrowers to maintain satisfactory academic progress as defined by their school to remain eligible. This usually means maintaining a minimum GPA or completing a certain number of credits each semester.

What to do if you're denied a student loan

Contact your school's financial aid office

Best for: Federal Direct Loans

If you were denied federal subsidized or unsubsidized loans because you didn't meet general eligibility requirements, reach out to your school's financial aid office to see if you can resolve the issue and regain eligibility.

“Contact your college financial aid office for clarification,” says Julie Beckham, financial education officer at Rockland Trust Bank. “The office should be able to explain why you lost or never had eligibility.”

File an appeal with your school

Best for: Federal Direct Loans and some private loans

If you were denied for not making satisfactory academic progress — a common reason for loan denial — you might be able to regain eligibility for a probationary semester by filing an appeal with your college's financial aid office.

“If you're still not making satisfactory academic progress at the end of your probationary period, you will be on the hook to pay out of pocket until you're back on track,” says Shannon Vasconcelos, senior director of education at Bright Horizons College Coach.

Get an endorser

Best for: Federal Direct PLUS Loans

If you're a graduate student or parent who was denied a PLUS loan due to an adverse credit history, you can reapply by completing PLUS Credit Counseling and securing an endorser. An endorser, similar to a cosigner, is someone with good credit who agrees to repay your loan if you can't. Be aware that their credit history will also be reviewed.

You can also appeal the denial if your application included errors or extenuating circumstances. For example, if your credit report contained inaccurate information due to identity theft, you may be able to provide documentation to support your case.

Apply with a cosigner

Best for: Private student loans

Most of the time, student borrowers are denied because they have no credit history or poor credit history. Reasons for denial include insufficient income, limited or no employment history, short credit history, low FICO score, or poor debt-to-income ratio. 

“You can ask someone with strong finances, such as a parent or other relative, to apply with you as your cosigner. As a cosigner, they're equally responsible for the loan and missed payments affect their credit as well,” says Beckham.

You can also try to find a private lender who works with bad-credit borrowers. However, this pathway tends to be more expensive.

“These lenders charge higher interest rates to compensate themselves for the risk they are taking on by lending to high-risk borrowers,” adds Vasconcelos.

Improve your credit score

Best for: Private student loans

If you were denied because of a bad credit score, get your credit in order now. This includes the following steps:

• Become an authorized user on a parent credit card or obtain a secured credit card.
• Spend within your means to avoid getting overextended on credit cards.
• Avoid getting too close to your credit card limit (try to stick to one-third of your limit).
• Set up automatic payments so you don't miss payments.
• Pay off your credit card bill in full every month if possible.
• Obtain free copies of your credit reports from the three credit reporting bureaus and review them for mistakes. Correct any errors by submitting a dispute letter explaining the errors you want fixed.

Alternative strategies to pay for college

Before applying for student loans, make sure you've exhausted all options for free funding first:

• If you're not eligible for federal student aid, find out if your state or college offers an alternative financial aid form to access state or institutional aid.
• Apply for private scholarships and grants.
• Look into part-time work opportunities. Your school may offer on-campus jobs open to anyone regardless of federal aid eligibility.
• See if your college offers a tuition payment plan to break up costs over the year. “Most payment plans don't require credit checks, charge no interest, and only charge a modest sign-up fee,” says Vasconcelos.
• Shop around for a more affordable college and consider living at home to cut costs.

“Ultimately, you have to decide how much debt, if any, you're willing to go into to get educated,” says Beckham. “That may involve some tough choices.”

See Also: What To Do If You Can't Afford College