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Getting denied for a student loan can be devastating, but fortunately you have the option of appealing your student loan denial. The exact appeals process can vary depending on the type of loan and your lender, but it’ll typically include writing a letter explaining why a reconsideration is warranted.
Key Takeaways
- Common reasons for private student loan denials include low credit scores and high debt-to-income (DTI) ratios.
- Contacting the lender or loan servicer can provide clarification as to why your application was denied and possibly lead to a reconsideration.
- If your appeal for a private loan is denied, you can try to reapply, though doing so will mean another hard inquiry on your credit report.
What Is a Student Loan Denial Notice?
A student loan denial notice (also known as an adverse action letter) is a missive from a private lender informing you that your application has been rejected. Fortunately, it typically includes the justification for the denial. Below are some common reasons private student loan applications are rejected:
You technically can’t be “denied” for a federal student loan, since you can’t directly apply for most of them. Rather, you’ll submit the Free Application for Federal Student Aid (FAFSA), and schools will use the information from that to determine how much financial aid (which may include federal student loans) to offer you.
The exception to this rule is a federal direct PLUS loan, which parents as well as graduate students can apply for and, as such, be denied for. Additionally, your FAFSA can itself be denied if you make an error on the application or you’re ineligible for federal student aid.
Note
Student loan eligibility requirements vary by loan type. For example, you generally don’t need to get a credit check to qualify for a federal student loan. However, you must be enrolled at least half-time in an eligible program that leads to a degree or certificate.
Steps to Appeal a Student Loan Denial
If your federal PLUS loan or private student loan was denied, then be sure to carefully review the explanation as to why. Once you’ve done that, follow these steps to appeal the decision.
- Gather documentation: You’ll typically want to write a formal letter explaining any mistakes on your original application or extenuating circumstances that justify a reconsideration. Be sure to also include any supporting documents, such as tax returns, pay stubs, or a credit report.
- File the appeal: Depending on the loan type, you’ll need to reach out to either your school’s financial aid office or the private lender. They can provide you with further information as to why your application was denied and what additional steps you may need to take to complete your appeal.
- Follow up and seek alternative assistance: After you’ve submitted the appeal, follow up in a couple days if you don’t hear back. If the appeal is unsuccessful, consider exploring alternative forms of financial aid, including scholarships, grants, and work-study programs.
Fast Fact
If you need more federal funding than what you’re initially offered, then you can request a professional judgment. This entails providing your school with a more accurate picture of your family’s ability to help fund your education. If approved, your Student Aid Index (SAI) will be updated, and you’ll be offered a new financial aid package. The financial aid appeal process is similar to the procedure for appealing a student loan denial.
Should your appeal itself be denied, then you can always reapply for the loan. To better the odds that your application gets approved this time, consider first boosting your credit score, increasing your income, and reducing your outstanding debt. However, be aware that submitting another loan application will result in an additional hard inquiry on your credit report, which can temporarily lower your score.
Tip
If you were denied a federal direct PLUS loan due to an adverse credit history, you can reapply with an endorser, someone with a better credit history who agrees to repay the loan if you fail to do so. Similarly, if you were denied a private student loan, you may be able to reapply with a co-signer.
The Bottom Line
If your student loan application is denied, you can appeal the decision. By understanding the reasons behind the denial, correcting any errors, and presenting a strong case, you can significantly improve the chances of a reconsideration. Additionally, you can take proactive steps—such as strengthening your financial situation, securing an endorser or co-signer, or exploring alternative funding options—to put yourself in a better position to reach your educational goals.
