Reasons You Could Get Denied for a Federal Student Loan

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Chris Snellgrove

By Chris Snellgrove

May 6, 2020

Many students think of federal aid such as Stafford loans as a “sure thing.” All you have to do is fill out the FAFSA and get your money…right?

In reality, there are a number of reasons you may get denied a federal student loan. And if you don’t know what these reasons could be, you might get taken by surprise.

If you need to borrow student loans, federal loans are usually best since they come with many benefits. These include an option to have your loans forgiven, an option to have loans based on income, and deferment options if you become unemployed or have an economic hardship. But it’s always best to exhaust all other options before borrowing, including scholarships, grants, employer tuition assistance, work colleges and other options.

Basic Eligibility Requirements

There are several baseline eligibility requirements for getting a federal student loan. If you do not meet any one of these, it could cause you to get denied.

First, you need to be either a citizen or an eligible non-citizen. And unless you’re from the Federated States of Micronesia, the Republic of Palau, or the Republic of the Marshall Islands, you’ll need a Social Security Number. 

You must also have a high school diploma or a GED. Alternately, you must have successfully completed homeschooling. 

If you are a male, you must register for Selective Service. If you are active duty military, then this is not a requirement.

Aside from not meeting one of these basic eligibility requirements, there are a few other things that could get your federal aid denied.

Loan Defaults or Grant Refunds

At the end of the day, the federal government is like any other lender. If you owe them money, they may not loan you anything else.

If you are currently in default on a federal student loan, you may be denied additional money. You may also be denied if you owe a refund on any previous federal grants.

In these situations, you must get out of default and/or pay grant money you owe before you can receive additional aid.

Satisfactory Academic Progress

Every school establishes its own minimum Satisfactory Academic Progress. If you fail to meet the SAP, your federal loan money may get denied. 

It’s possible to still get your money if you write a letter of appeal and the school’s financial aid office approves it. But if you continue to not meet SAP, they will be less likely to approve future appeals.

Drug-Related Crimes

Being convicted for certain crimes may cause you to get denied for federal student loans. Specifically, being convicted for the possession or sale of illegal drugs while you were receiving federal aid may disqualify you for future aid.

If so, you can still complete the Student Aid Eligibility Worksheet. Afterwards, you may be eligible for full or partial federal aid. You may also regain eligibility by completing certain rehab programs or subjecting yourself to random drug testing.

See also: Complete Guide to Financial Aid and the FAFSA

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