Report: Nearly 40% of Americans Would Be Denied a Private Student Loan
By Maria Carrasco, NASFAA Staff Reporter
As new limits on student loans are set to be enacted in the coming months under the One Big Beautiful Bill Act (OBBBA), a new report is examining the practices of private student loan lenders, warning that 40% of Americans would likely be denied a private student loan.
Under OBBBA, a slew of changes were made to the federal student aid programs, including the elimination of the Graduate PLUS loan program and new loan limits for graduate and professional students. Beginning on July 1, 2026, graduate students’ Direct Unsubsidized Loan annual limit will remain at $20,500, but will have a new aggregate limit of $100,000. Professional students’ Direct Unsubsidized annual limit will be $50,000, with a new aggregate limit of $200,000. Additionally, there are new limits for Parent PLUS loans, where new borrowers will have an annual limit of $20,000 and an aggregate limit of $65,000 per dependent student.
A group of Democratic lawmakers has voiced concerns over these new loan limits, warning that some students would not be able to finance their education and in turn would have to turn to private lenders, where benefits such as the Public Service Loan Forgiveness (PSLF) and borrower defense to repayment are not available. Almost any U.S. citizen or eligible non-citizen individual can qualify for a federal student loan, however, lawmakers note, not every student would be able to qualify for a private student loan.
A new report, conducted by Protect Borrowers and the Century Foundation, examines the practices of 34 private lenders and found that 40% of Americans would likely be denied a private student loan from traditional, prime lenders based on credit and income underwriting requirements. The list of lenders analyzed covers 48 states, and ranges from national lenders to non-profit and state-restricted lenders.
Additionally, the organizations found that nearly two-thirds of Pell Grant recipients – 61.1% – would be excluded from qualifying for the vast majority of private student loans from traditional, prime lenders based on minimum income requirements. Every significant lender in this analysis also required that borrowers or cosigners be “creditworthy.” The organizations warn that this requirement likely prevents roughly 25% of Americans from qualifying for any private student loan from a prime, traditional lender.
The organizations also warn that many non-profit lenders have significant state-based residency restrictions, which can further limit borrowers’ access to receiving a private loan. Specifically, the report notes that roughly 84% of non-profit and/or state-affiliated lenders analyzed in this report have residency restrictions, where the borrower must either be a resident of one or a number of states, attend a school in a limited number of states, or attend a highly limited subset of schools.
The organizations also voice concerns over borrowers’ need for a cosigner to receive a private student loan. The report notes that between 61% to 100% of loans originated by the lenders in this study require cosigners. The need for cosigners disadvantages low-income and underprivileged borrowers, who may not have the required household wealth and financial stability to access a private student loan.
Lastly, the organizations found that for borrowers trying to access a private student loan, their higher minimum credit score and income requirements compared to an undergraduate loan. The organization warn that many more Americans could be denied a private graduate student loan, compared to the undergraduate private marketc.
“In short, the OBBBA will push millions of borrowers into the private loan market, toward shady predatory lenders, or out of higher education altogether,” the report reads. “The additional interest, fees, and monthly payment costs that borrowers are then forced to bear, will siphon billions of additional dollars out of the economy each year, taking away money that would have otherwise driven consumer spending, built household wealth, or helped Americans achieve major financial milestones like homeownership or retirement. Other students, facing private loan denials or a possible lifetime of debt, may simply give up on getting a degree.”
Protect Borrowers and the Century Foundation list two recommendations to reform the private student loan market to better serve borrowers.
The first is that states should require private student loan companies to register with the state financial regulator and report on their portfolios, including loan interest rates, underwriting criteria, and collection activities. Requiring these companies to provide more data will allow borrowers and policymakers to accurately assess who can access private student loans and on what terms, the organizations wrote.
Additionally, both the federal government and states should significantly increase direct funding for higher education for students, rather than relying on debt-based financing systems.
“At the end of the day, a higher education funding system that relies upon lending at all—including even federally or state-issued student loans—still saddles millions of borrowers with years of payments that reduce their savings for major financial milestones, depresses consumer spending, and leaves borrowers drowning in inescapable debt, ultimately denying the financial stability that a college degree has long promised,” the report reads. “It is long overdue for higher education to be funded directly by federal and state governments as a true public good, not financed through debt that undermines the very opportunities it is meant to create.”
Publication Date: 4/13/2026
Armand R | 4/13/2026 5:4:45 PM
The last paragraph starts with the unfortunate truth - that a college degree saddles graduates with debt they shouldn't have to start their adult life with. But the solution proposed doesn't solve the problem - it simply places the burden on taxpayers. What is always left unaddressed is the cost of higher ed and the wasteful spending. Also left unaddressed is the declining value of a college diploma. MBAs are a dime a dozen and often seem to lead to jobs that pay less than trades. Before the lending problem can be fixed, the moral compass of higher ed needs to be recalibrated.
Amy P | 4/13/2026 2:9:19 PM
Clarification Jennifer - lenders started to pull out of the student loan market when Direct Lending started. With the shut down of the FFELP program lenders had to decide whether to get out of student lending entirely or switch to (or expand) private student loans. A lot decided to get out entirely.
The way I would explain the non-connection between student loan limits and the cost of higher education would be to ask someone if their rent or mortgage payment would decrease if their salary was decreased. And if they respond "but they can always go somewhere cheaper" ask them how easily they could move to some place cheaper if there pay was cut and what the cost would be.
Michelle H | 4/13/2026 2:6:33 PM
This is not a loan to purchase a car. It is a loan to purchase a career that will in turn result in the contribution of income to the US economy. Shame.
Alexandria J | 4/13/2026 1:49:50 PM
I echo the comments already given. A better title for this article would be, 40% of students will be unable to afford higher education.
Jennifer A | 4/13/2026 11:5:22 AM
I am not at all surprised by the outcome they found. This was expected, especially since many private lenders were already pulling out of the student loan market. Of course those that remain have high lending criteria because they want to know they will get their money back with interest. Otherwise, what is the point of lending to a borrower? I think David S. and Jeff T. hit the nail on the head with both of their posts.
Jeff T | 4/13/2026 9:41:21 AM
These OBBBA policies are the higher education financing equivalent of voter suppression, and the victims are largely the same, the very students that systems of financial aid were supposedly designed to level the playing field for. This article arrives at the only sensible conclusion: treat education as a public good, reverse this nation-weakening trend of hyper privatization before it's too late.
David S | 4/13/2026 8:47:40 AM
In voting for this bill, Republicans claimed it would reduce the cost of college. I'm torn between whether they actually naively believed that, or if they knew that instead of driving down the cost of college, it would drive down enrollment.
I think it's the latter, as there's plenty of other evidence to show that's their goal. The only country in the world whose political leaders are actively trying to educate fewer people.
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