Federal student loans can make paying for college easier, but not everyone qualifies. Eligibility is based on a range of factors, and there are various reasons why someone might be denied federal loans.
That can throw a wrench in your college plans, but there are alternatives when federal student loans are out of reach. Here’s how to pay for college if you don’t qualify for federal aid.
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Why students don’t qualify for federal financial aid
Students must complete the Free Application for Federal Student Aid (FAFSA) to apply for federal loans. The U.S. Department of Education sets the guidelines for federal student loan eligibility. Borrowers who apply for federal aid must:
- Demonstrate financial need for most loan programs
- Be a U.S. citizen or eligible noncitizen
- 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)
- Be enrolled at least half-time or accepted in an eligible degree or certificate program
- Maintain satisfactory academic progress while in school
- Not be in default on a federal student loan or owe money on a federal student grant
- Demonstrate that they’re qualified to obtain a college or career school education
If you meet the basic eligibility requirements for federal student loans, your school will calculate how much aid you’ll receive. Financial aid awards are based on your Student Aid Index (SAI), your year in school and enrollment status, and your cost of attendance (COA).
Beginning with the 2024 – 2025 school year, the SAI replaces the Expected Family Contribution (EFC).
Schools use your SAI to decide how much need-based aid you qualify for. Higher SAIs suggest that a student has more financial resources, while lower SAIs indicate a greater financial need.
Your financial need is the difference between what you and your family can contribute, any aid you’ve already received (like scholarships), and your COA. Need-based federal aid includes:
- Direct Subsidized Loans
- Federal Pell Grants
- Federal Supplemental Educational Opportunity Grants (FSEOG)
- Federal Work-Study
All of these aid options are open to undergraduate students. Graduate students can also apply for work-study aid. However, you can’t receive more need-based aid than the amount of your actual SAI-based need.
Check out our explainer on maximum borrowing limits for federal loans.
Non-need-based aid, on the other hand, doesn’t consider your SAI.
Instead, it’s calculated based on your COA and the amount of aid you’ve received so far. Direct Unsubsidized Loans, Federal PLUS Loans, and Teacher Education Access for College and Higher Education (TEACH) Grants are all forms of federal non-need-based aid.
Both undergraduate and graduate students can receive Direct Unsubsidized Loans and TEACH Grants. Federal PLUS loans are reserved for graduate and professional students or parents of eligible undergraduates.
Non-federal financial aid options
Grants and scholarships can provide students with free money to pay for college.
The only time you might need to repay a grant or scholarship is if the award is contingent on meeting a service requirement. For example, you might have to agree to work in a particular area or career field after college to avoid a repayment obligation.
Your school’s financial aid office can be useful for more information on scholarships and grants. If you’ve exhausted the possibilities for getting free money to pay for college, then you can turn to private student loans next.
1. Find out why you didn’t qualify for federal aid
If you were denied federal financial aid, follow these steps:
- Ask about the reason for denial. Your school’s financial aid office can help you pinpoint why you didn’t qualify. With that information in hand, work with your financial aid office to chart a course for regaining eligibility in the future.
- Appeal the school’s decision. Once you’ve taken the necessary steps to qualify for federal aid, contact your financial aid office to file an appeal. This usually involves writing a financial aid appeal letter and demonstrating that you’ve taken adequate steps to meet eligibility requirements.
For example, if you were denied student loans because you failed to maintain satisfactory academic progress, you may be able to get your loans reinstated by improving your grades and GPA.
2. Look into state scholarships or grants
State-sponsored scholarship and grant programs may require you to submit the FAFSA to apply for funding. So it’s in your best interest to submit the FAFSA, even if you know that you won’t qualify for federal aid.
Here are a few examples of state-run scholarship and grant programs:
- Cal Grant: The Cal Grant program offers financial aid that doesn’t need to be paid back to students attending approved California colleges and universities. Eligibility is based on your FAFSA or CA Dream Act responses, GPA, preferred school, and whether you’re a recent high school graduate.
- Excelsior Scholarship: The Excelsior Scholarship program allows eligible New York residents to attend a SUNY or CUNY college tuition-free. To qualify, students must be New York residents and have a household income of $125,000 or less. The FAFSA is required to apply.
- ISAC Grants: The Illinois Student Assistance Commission (ISAC) sponsors a number of grant programs to Illinois students, most of which are need-based. You’ll need to submit the FAFSA to apply for grant opportunities. ISAC also administers several scholarship programs, including programs for future teachers and social workers.
Your school’s financial aid office can help you locate scholarships and grants offered in your state. If you’re attending an out-of-state school, check both your home state and the state where you’re attending school for scholarships and grants.
3. Look into school scholarships or grants
Colleges and universities can be another source of scholarship and grant funding when you don’t qualify for federal financial aid. Many schools offer both options to students who qualify based on one or a combination of the following:
- Financial need
- Academic merit
- Athletic performance
- Musical, artistic, or theatrical ability
When searching for school-specific programs, pay attention to application deadlines. Programs may have limited funding available and offer scholarship or grant funding on a first-come, first-served basis. Cast the net wide and apply for multiple scholarships or grants to improve your chances of receiving an award.
Again, you can talk to your school’s financial aid office about available options and how to apply for scholarships and grants. You can also ask about scholarships offered by civic organizations, nonprofits, or businesses in your local area.
Browse our scholarship guide for more tips on how to find free money for school.
4. Consider private student loans
Private lenders can offer student loan funding to borrowers who don’t qualify for federal aid or need to close financial aid gaps. It’s important to know how federal and private student loans compare.
While federal loans have low, fixed interest rates, private student loans may have variable or adjustable rates. The amount you can borrow varies by lender, and with most private loans, you’ll need a good credit score or a cosigner with good credit to qualify.
Private student loans lack some of the benefits of federal loans, including deferment and forbearance periods, as well as the opportunity to pursue loan forgiveness.
Pros
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Can help close funding gaps to pay for college
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Lenders can offer generous loan amounts
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Flexible repayment terms
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Some lenders can offer incentives (e.g., career counseling)
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Borrowers with excellent credit can get lower rates
Cons
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Private loans may carry higher interest rates than federal loans
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Borrowers may pay origination, disbursement, or prepayment fees
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No built-in protections for deferment or forbearance
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Not eligible for loan forgiveness
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Cosigner may be required for approval
If you’re considering private student loans, calculate how much money you need to pay for school and how likely you are to qualify based on your credit history and overall financial situation
Here are some factors to weigh when shopping for a lender:
- Minimum and maximum loan amounts
- Interest rates and whether they’re fixed or variable
- Applicable loan fees, such as origination or disbursement fees
- Eligibility requirements, including whether borrowers need a cosigner
- Repayment terms
You can read more about the best private student loan lenders to help with your decision.
If I don’t qualify for federal aid now, can I qualify next semester?
You’ll need to submit the FAFSA each year to determine your eligibility for federal financial aid. If there’s a change to your situation, that could affect your ability to qualify for federal loans or grants from one year or even one semester to the next.
If you know that you didn’t qualify previously, you may be able to take steps to become eligible. For example, if you were denied Direct Loans because you were attending school less than half-time, you could increase the course hours you’re taking to meet that requirement.
The U.S. Department of Education recommends talking to your school’s financial aid office to find out your options for gaining or regaining eligibility status for federal aid. You can also check out our guide to learn more about how to pay for college.