What to do when denied for a private student loan (2024)

FAQs

What to do when denied for a private student loan? ›

Being denied student loans is common for would-be borrowers, and several factors could lead to loan denial. Your credit history, credit score, insufficient application information, or other issues could cause you to be rejected for a loan.

Being denied student loans is common for would-be borrowers, and several factors could lead to loan denial. Your credit history, credit score, insufficient application information, or other issues could cause you to be rejected for a loan.

Private student loans generally have tougher eligibility requirements than federal loans. In addition to age, income and credit score minimums, students must be enrolled at an eligible school and use funds for specific expenses.

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.

Compared with federal student loans, private student loans have some disadvantages: Private student loans are harder to get. Almost all private student loans are credit-based. This means you must show a positive credit history and adequate income to qualify or have a co-signer who can assume the risk.

If you don't meet baseline eligibility requirements, or if you've previously defaulted on a loan, you may not be approved for a federal student loan. You must maintain "satisfactory progress" in school to be approved for student loans. You can take steps to regain or improve your eligibility for student loans.

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.

The amount you can borrow varies by lender, but private student loan limits are often based on a total loan amount ranging from $75,000 to $120,000 for undergraduate students and $150,000 to $300,000 for graduate or professional students.

Most federal student loans do not require a credit check to qualify for financing. PLUS loans are the one exception; these loans involve a credit check. However, they're only looking for an adverse credit history. There are no minimum credit score requirements.

Among our partner lenders, you'll need a credit score of at least 670 to qualify for a private student loan, although some lenders don't disclose their minimum credit score requirements. However, the higher your score, the better. Most lenders will give you better rates and terms if your score is at least 700.

How do I pay for college if I was denied student loans? ›

The Bottom Line. There may still be ways to pay for college if financial aid isn't enough. Scholarships, grants, part-time jobs and private student loans can all help cover the gap—or you might choose to attend a more affordable college. The right path for you will depend on your college goals and financial situation.

According to the office of federal student aid, some applications can be denied because applicants did not meet the basic eligibility requirements. These include: Having demonstrated financial need for need-based federal student aid programs. Being a U.S. citizen or an eligible non-citizen.

The good news is that if you reject a student loan and then change your mind later in the same academic year, you can reinstate your loan. The same goes if you took less than you actually qualify for — you can increase your loan amount later on.

The Cons of Private Student Loans

Most private student loans do not offer income-driven repayment plans. Private student loans do not qualify for teacher loan forgiveness or public service loan forgiveness. Private student loans have limited options for financial relief when a borrower experiences financial difficulty.

Currently, Direct PLUS loans are the only federal student loan option that will do a hard inquiry. This type of loan is only available to graduate and professional students, and parents of undergraduate students. On the other hand, private student loans do require a hard credit inquiry and can impact your credit score.

Private student loans can help you pay for college when you've maxed out all other forms of financial aid, but it may not be worth taking on more debt if you can avoid it. Before settling on private student loans, borrowers should know the risks of taking on privately held college debt.

Your credit score is too low

Good or excellent credit (a score of 690 or higher) and a history of paying other loans or credit cards on time will help you qualify for a personal loan, while fair or bad credit and a history of missed payments could get your application declined.

Private student loans often require an established credit record or a cosigner. Interest may be tax deductible.

Unlike federal student loans, private student loans have no hard deadlines that borrowers need to meet to qualify. You can apply at any time. However, to avoid late payments to your school of choice, you do need to give the lender plenty of time to disburse the funds.