Denied for a private student loan? Here’s what to do.

Don’t worry—you’ve got options

Getting denied for a private student loan can be a tough situation. I know because I’ve been there. One day you’re picking out dorm room décor and getting ready for orientation, and the next you’re wondering if you’re even going to make it to college.

Don’t panic. There are steps you can take if you can’t get approved for a student loan. First, you need to understand why your student loan application was denied and what your next steps are.

Why were you denied a student loan?

Every lender has their own requirements for getting approved for a student loan. Lenders may look at your employment history, credit score, debt-to-income ratio, and enrollment status at your school. One of the most common reasons why a student might not qualify for a private student loan is because they don’t meet their lender’s FICO® Credit Score criteria.

Your FICO® Credit Score is a three-digit number that lenders use to measure how likely you are to be able to repay debt. If you’ve never borrowed or had to pay back money before, this number may not be high enough to qualify you for a loan. If you’re no stranger to borrowing but have missed or been late on payments, your credit score may have also been impacted and can affect your chances of getting approved.

Having a limited or bad credit history can make getting approved for a private loan difficult, but there are steps you can take to move if you’ve been denied a student loan.

What to do if you were denied for a student loan

1. Maximize scholarships, grants, and federal loans

Before you even consider a private student loan, make sure you’ve used every option to pay for college that is out there. Make sure you’ve maximized free money options like college scholarships and grants, and considered federal student loans. Planning for college can be overwhelming, but there are people and resources that can make it easier on you. Talk to your counselor and double check that you’ve taken advantage of everything available to you before applying for a private student loan.

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2. Consider a creditworthy cosigner

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.

Many students ask their parents, but if that’s not an option, you can also ask a guardian or relative to be your cosigner. In my case, my aunt cosigned the student loan that allowed me to attend college. Just make sure to have an open and honest discussion with your potential cosigner about responsibilities to make sure you’re making a responsible decision.

It’s important to understand that your cosigner is equally responsible for your loan—that means if you miss a payment, it will affect your cosigner’s credit as well as your own. After you’ve met certain requirements from your lender, like making a certain number of on-time loan payments, you may be able to release your cosigner from their responsibility for the loan.

There’s also another option for parents or creditworthy individuals that want and are able to help. If they want to take responsibility for paying for part of your education, they can take out a loan in their name.

3. Check your credit report

Reach out to one of the three national credit bureaus (Experian, Equifax, and TransUnion) to view your credit report. You can check your credit for free with each of these bureaus once a year to get a better understanding about what is impacting your score. By keeping an eye on your credit and starting with simple steps like making on-time payments and paying off your balances, you’ll build your credit health in no time.

For students new to credit, talk to your parents about opening a secured or student credit card and practice good credit habits like keeping your balance low and never missing a payment.

You have options

Figuring out how you’re going to pay for college doesn’t have to be a challenge. If you’ve been denied a student loan, work on building or improving your credit, and don’t be afraid to ask the people around you for help. If you’re still having trouble, don’t hesitate to contact your school’s financial aid office. They may have other suggestions to help you pay, like a tuition payment plan that allows you to pay your tuition bill in monthly installments. Don’t let a student loan denial put a damper on your college journey.

footnote Sallie Mae does not provide, and these materials are not meant to convey, financial, tax, or legal advice. Consult your own financial advisor, tax advisor, or attorney about your specific circumstances.

footnote FICO and "The score lenders use" are trademarks or registered trademarks of Fair Isaac Corporation in the United States and other countries.

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