Reasons why you could be denied a federal student loan

You may miss out on federal student loans if you don't meet baseline eligibility requirements.

If you're hoping to use federal student loans to pay for college, filling out the Free Application for Federal Student Aid (FAFSA) loan application is a necessary step. While completing the FAFSA is a precursor to qualifying for financial aid, however, it's not a guarantee that you'll receive it. That's why it's critical to plan for college.

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There are specific baseline eligibility requirements that must be met for you to qualify for federal student loans. And if you don't meet them, it's possible that you may not qualify for loans or other types of financial aid.

If you have yet to complete the FAFSA or you have but you've been denied federal student loans, here's what you need to know.

Can you be denied a federal student loan?

Yes, you can be denied a federal student loan for many reasons. It's a common misconception that completing a FAFSA loan application means you'll automatically get approved for federal student loans. In reality, not everyone is eligible.

So, what disqualifies you from getting financial aid? Here are at least seven potential reasons why:

  1. You're not making satisfactory academic progress at your school.
  2. You've defaulted on an existing federal student loan. 
  3. You owe a refund on any previous federal grants. 
  4. You're enrolled in an academic program that makes you ineligible for funding. 
  5. Your eligible noncitizen status was revoked or expired. 
  6. You're incarcerated.
  7. You pled guilty to a crime involving federal student aid fraud. 

You can also be disqualified for federal student loans if you fail to meet any of the baseline eligibility requirements. If you've been involved in a drug-related crime, you may still be able to get federal student loans upon completion of a rehabilitation program.

Private student loans are also an option if federal student loans are off the table. You can browse private student loans on Credible's website to see what multiple loan lenders are offering and whether it fits your personal finance needs.

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Federal student aid eligibility requirements

The Department of Education (DOE) is specific about the requirements you need to meet to be eligible for federal student loans and financial aid. To be eligible for federal aid, according to the DOE, you must be able to check off all of the following:

  1. Be a citizen or eligible noncitizen of the United States.
  2. Have a valid Social Security number. There are exceptions for students from the Republic of the Marshall Islands, Federated States of Micronesia, and the Republic of Palau.
  3. Have a high school diploma or a General Education Development (GED) certificate, or have completed homeschooling. 
  4. Be enrolled in an eligible program as a regular student seeking a degree or certificate.
  5. Maintain satisfactory academic progress.
  6. Not owe a refund on a federal student grant or be in default on a federal student loan.
  7. Register (or already be registered) with the Selective Service System, if you are a male and not currently on active duty in the U.S. Armed Forces.
  8. Not have a conviction for the possession or sale of illegal drugs for an offense that occurred while you were receiving federal student aid (such as grants, work-study, or loans).

You might have noticed that a credit score or credit check isn't included here. That's because those things don't affect your eligibility for federal student loans. Contact your school's financial aid office if you believe you should qualify for a federal student loan but were denied.

PROS AND CONS OF PRIVATE STUDENT LOANS

What are other student loan options? 

If you can't get federal student loans, there are other avenues you can pursue to pay for school. Some of the possibilities include:

  • Start a grant or scholarship search
  • Using personal loans to pay for school
  • Taking out private student loans

Scholarships and grants can either be need or merit-based and funding for these can sometimes be competitive. If you're interested in researching scholarships and grants, your school's financial aid office may be able to help. You can also seek out scholarships and grant programs online.

A personal loan may seem like a good option but it can be difficult to find loan lenders that allow personal loans for education costs. The better choice may be to apply for private student loans instead. Private student loans don't have the same eligibility requirements as federal student loans. The most important factor for approval is usually your credit history and credit score.

Even if you don't have perfect credit, you may still be able to qualify for a private student loan with a cosigner. Just enter some basic information into Credible's free online tools to see what kind of student loan rates, loan limits, and other items that you're eligible for today.

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Compare private student loans carefully

If you're interested in private student loans to pay for school, think about how much you'll need to borrow and then do your research. For instance, using Credible to compare private student loans with fixed interest rates against those with variable interest rates can give you a sense of how much they'll cost.

An online loan calculator can also help you estimate your monthly payments to see how private loans fit your budget.

Remember, private loans do have to be repaid, unlike scholarships or grants. But if you're able to borrow at low-interest rates, they're a good option to consider if you're unable to get federal student loans.

Use Credible to compare student loan options and find financial advice.

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