There’s no doubt that college can get expensive, and a lot of times you may need a student loan to pay for it. But what if you’re denied a loan? Here’s what you can do.
Why You’re Getting Denied a Student Loan
There are many different reasons why your student loan applications might be getting denied. It’s important to know what they are and why you got denied. That way, you can take steps to fix it so it doesn’t happen again. Here are some of the reasons you might get denied a student loan.
You Don’t Meet the Credit Requirements
Most private lenders have a credit requirement. They need to know that you’re trustworthy enough to pay back the loan, and your credit score is how they determine that. Not meeting the minimum credit score requirement makes you risky to lenders and a lot more likely to get denied a student loan.
You’ve Already Reached Your Borrowing Limit
Private lenders will have their own borrowing limits, often dependent on your school’s cost of attendance. These amounts are what institutions believe to be the amount you’ll need for college. If you’ve already borrowed either the lender’s limit or the total of your school’s cost of attendance, lenders may deny your loan application requesting more.
You Don’t Meet the Basic Eligibility Requirements
There are other requirements lenders will look at such as meeting a minimum income, your debt-to-income ratio, your employment and income history, and your future earning potential. All these, in one way or another, relate to your ability to pay back the loan. If you fall short on any of these according to the lender’s requirements, they may deem you too risky to give money.
What to Do If You’re Denied a Student Loan
Being denied a student loan can make you feel like there’s nothing left that you can do. But that’s not true. There are certain steps you can take to help your situation, even if you’ve been denied a loan. The following is a list of actions you can take that’ll help you.
#1: Submit An Appeal
If you were denied but now believe you would be eligible due to extenuating circumstances or incorrect information, you can appeal the decision. This is true for both federal and private student loans. In general, you’ll need to provide a written statement explaining your situation with evidence backing up your claim. Because each private lender is a unique entity, they each may have a unique appeal process, so be sure to check with them directly.
#2: Consider Adding a Creditworthy Cosigner
A lot of lenders require you to meet a minimum credit score. If you don’t meet that credit score, consider adding a cosigner. A cosigner is someone who signs onto the loan, taking legal responsibility for the loan alongside you. A good cosigner is someone with a good financial history and someone you can trust. Typically, a cosigner is a parent or a family member, but, in reality, they can be anyone, including friends, so long as they are able and willing. Even if you don’t need a cosigner, it’s still a good idea to get one because they can help you secure better loan terms.
#3: Check Your Credit Report
You’ll also want to check your credit report to see why you have a bad credit history and what you can do to fix it. Go to the Annual Credit Report website where you can get a free credit report. These reports provide a detailed overview of your credit history. You can see where you fall short and take steps to fix it. This will raise your credit score and make it easier to apply for loans in the future. Even paying your bills on time can raise your credit score in as little as six months.
#4: Apply for More Scholarships and Grants
Loans aren’t the only source of funding you can use for a college education. You can also apply for college scholarships and grants. Since they are free money, you’ll never have to pay them back, making them a great help in covering the costs of college. You’ll want to apply to as many scholarships and grants, small and large, as you can to help your chances of winning.
#5: Find a Job That Offers Tuition Assistance
There are many different jobs out there that offer to pay for part or all of your school tuition if you work for them. The steady income you’ll get can help take care of college expenses. You might even have extra income left over to cover other things. This is great because not only do you get work experience but you’re, in essence, getting paid to go to school.
#6: Consider Community College
Community college is also another great option if you’re denied a student loan because it’s often more affordable than traditional 4-year schools. In some cases, you may not pay anything because your aid covers all the college costs. Or, you will more easily be approved for loans because you’re asking for a lesser amount. Community colleges also have a lot of different programs that might interest you. This includes partnering with 4-year schools and having their own bachelor’s programs.
#7: Look Into Loan Options with Flexible Eligibility Criteria
There are lenders who offer bad credit loans or have more flexible eligibility criteria. While you can look for them online one-by-one, you can use Sparrow instead to save both time and money. Sparrow partners with lenders who offer these types of loans. That way more students can take advantage of them. Just fill out the Sparrow application to see what rates you can get.
Final Thoughts from the Nest
In some ways, being denied student loans can feel like the end of the world. But don’t worry. There are still plenty of things you can do. And we, here at Sparrow, have got your back. Sign up with us to apply for new loans and take some of the measures we’ve listed above. The important thing is to not give up. Trust us, you will make it to college.