When you take out private student loans, your lender works with your school to certify the loan before disbursing funds. But what happens when a school won’t certify private loans for college?
If private student loan certification isn’t granted, there are steps students can take to address the issue.
Here’s an overview of how private student loan certification works, potential reasons for having certification denied, and some options to remedy the situation.
Understanding Private Student Loan Certification
Private student loan certification is often a required step for funds to be disbursed by a lender to your school. This is intended to protect student borrowers by ensuring that they’re informed about their federal financial aid options and the school’s cost of attendance when taking out private student loans.
With school-certified private student loans, borrowers fill out and sign a Private Education Loan Applicant Self-Certification form after receiving loan approval. This form provides lenders with a student’s enrollment information and any financial assistance they’ve received, such as grants or scholarships.
Next, lenders send the private student loan information to the school for certification. Schools are responsible for confirming that students are enrolled and that the loan amount does not exceed the cost of attendance: tuition, fees, books, living expenses, transportation costs, and dependent care (if needed). If this information checks out, the certification moves forward and the loan funds will be disbursed without any further action required by students.
While waiting, you might be wondering “how long do private student loans take to process?” It can take anywhere from two to 10 weeks for a student loan to process, depending in part on any issues in the student loan certification process.
When the student loan certification is complete, borrowers receive a final loan disclosure from their lender. This indicates the loan amount, which could be adjusted by the school if the requested funds exceed the total cost of attendance. Borrowers are then offered a three-day waiting period after receiving the final disclosure, known as the right-to-cancel period, to cancel the loan with no penalty.
Do private loans go directly to the school or student? With school-certified loans, the lender disburses loan funds directly to the school.
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The Role of Schools
After issuing loan approval, a lender forwards a certification request to your school’s office of financial aid. This involves verifying certain information provided when applying for the loan, including enrollment status, expected graduation date, year in the program, and requested loan amount.
Federal regulation prohibits students from receiving student aid that exceeds the cost of attendance. To determine the maximum amount of loan funds, the school financial aid office deducts all other types of financial aid — scholarships, grants, and federal student aid — from the school’s cost of attendance for that semester or academic year.
A key difference with private student loans compared to federal loans is that schools do not consider the Student Aid Index (SAI) when calculating how much can be borrowed in private student loans. Additionally, maintaining satisfactory academic progress could be required by schools to certify private student loans.
With all this information, schools will either certify, certify with changes, or deny certification. For instance, loans could be certified for a lesser amount than what was initially requested if it surpasses the school’s cost of attendance.
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Reasons for Certification Denial
There are a few possible reasons why a school won’t certify private loans. Resolving any such issues — whether on behalf of the student or school — is necessary for the disbursement of student loan funds to move forward.
Common Scenarios for Student Loan Certification Refusal
Here’s a look at some common scenarios where schools might refuse private student loan certification.
Exceeding Cost of Attendance
As mentioned above, schools are prohibited from certifying a loan amount that’s greater than the cost of attendance, minus any financial aid awarded.
Note that schools may list different dollar amounts for the cost of attendance depending on a variety of factors. For instance, students living on campus may have a different cost of attendance than those living off campus. Whether you’re paying in-state vs. out-of-state tuition and attending undergraduate vs. graduate school can also impact how your school calculates your cost of attendance.
Schools may break out the cost of attendance into separate expenses. This means that student loan certification could be denied for specific expense categories (e.g., housing costs) if they’re higher than what’s allowed by the school.
Satisfactory Academic Progress Issues
Students are required to maintain Satisfactory Academic Progress (SAP) at their school to continue receiving financial aid. Each school sets its own SAP policy, but generally students need to maintain a 2.0 GPA to maintain eligibility.
While private student loans typically don’t have SAP requirements, losing financial aid could impact your ability to pay for college.
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Enrollment Status Discrepancies
It’s not uncommon for students to adjust their course load, but a change in enrollment or incorrect reporting of enrollment status could lead to certification denial.
Student loan certification often occurs in the weeks preceding the start of the semester, so it’s important to ensure you’ve successfully enrolled before then. Additionally, a discrepancy could occur if dropping or adding classes impacts enrollment as a full-time vs. part-time student.
Steps to Take When Loan Certification Is Denied
If private student loan certification is denied by your school, there are a few options to consider to avoid delayed or halted disbursement.
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Request an Explanation from the School
Your school’s financial aid office is usually the point of contact to understand the rationale for certification denial and the necessary steps to resolve the problem. Errors with enrollment status or personal information can usually be addressed quickly, but it’s important to reach out promptly.
Appeal the Decision
If the denial involves exceeding the cost of attendance, students may need to appeal the decision with their school. Often referred to as a professional judgment, this appeal aims to increase the student’s cost of attendance to be eligible for additional student loan funding.
Financial aid offices typically consider professional judgment on a case-by-case basis, so it’s important to have documentation to support the request for revising the cost of attendance. For example, a student living off-campus could provide their renewed lease to show an increase in rent. Other circumstances that could warrant a professional judgment include childcare, disability-related expenses, and medical costs.
Explore Alternative Funding Sources
Students often use multiple funding sources to pay for college.
Applying for college scholarships and grants could secure financial aid to help cover tuition, room and board, and other school expenses. This type of aid is usually awarded based on academic merit or financial need, and doesn’t need to be paid back.
To apply for most scholarships and grants, you’ll need to fill out the Free Application for Federal Student Aid (FAFSA). After completing the FAFSA, students receive a financial aid package from the schools they’ve been accepted at, outlining eligible financial assistance, including federal student loans, work-study, grants, and scholarships.
Managing Private Student Loan Debt Responsibly
Staying on top of private student loan debt is essential for long-term financial health. Understanding your loan terms, including the interest rate and repayment plan, is key to developing a payback strategy that avoids fees and penalties.
After graduation, students may have a grace period before they need to start repaying their private student loans. Once repayment begins, setting up automatic payments could provide a discount on the loan interest rate and help ensure you’re sticking to your debt payoff goals.
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The Takeaway
Private student loan certification is a required step for funds to be disbursed to your school. If your school doesn’t certify your private student loans, don’t panic. Reach out to your school’s financial aid office to determine if any errors have been made, then take the necessary steps to resolve it.
If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.
FAQ
Can schools deny private student loan certification for any reason?
No. Schools deny private student loan certification if the amount exceeds the cost of attendance or if there are discrepancies in a student’s enrollment status.
What happens if a private student loan is disbursed without certification?
Private student loans cannot be disbursed until a school completes the certification process. In rare circumstances, students may be eligible for a false certification discharge if a loan was disbursed despite a student being ineligible to receive a loan.
Are there limits on the amount schools can certify for private student loans?
Yes, schools cannot certify private student loans exceeding the cost of attendance, minus any financial aid. Note that students can request a professional judgment to increase their cost of attendance, but these are granted on a case-by-case basis.
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SoFi Private Student Loans
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