What are the Reasons for Education Loan Rejection? Read to Know Them All!

Every year, many Indian students seek an education loan overseas. Only a handful are successful in obtaining finance from their lenders. The number of students who did not receive funding owing to an education loan rejection is far more than the proportion of students who did. The majority of candidates are unaware of the reasons behind their education loan rejection. This article tries to address some of the key reasons for an education loan denial and provide advice on how to successfully secure funding for higher education in India or overseas.

Must Read: What is the Student Loan Eligibility Criteria for Studying Abroad?

What is an Education Loan?

Education costs more and more in India and around the world. Students are finding it increasingly difficult to afford quality education as college and school tuition continue to rise. The only method to deal with the escalating costs is to apply for an Education Loan, which offers other benefits in addition to paying college tuition. 

An education loan is a loan that students can apply for to help pay for their education in India or abroad. Various banks and financial institutions provide Education Loans to hopefuls at attractive rates in order to assist them in making great education accessible. 

Benefits of Education Loan

Getting an education loan has multiple benefits. Some of them are listed below:

  • Depending on your field of study, the loan amount can range from Rs 1 lakh to Rs 1 crore.
  • In some circumstances, 100% financing is possible.
  • Loans for education are widely available.
  • These loans have low-interest rates.
  • The repayment options are very flexible as compared to other loans.
  • Another significant advantage of student loans is the accompanying tax breaks. The loan interest is totally tax deductible under Section 80E of the Income Tax Act of 1961. 
  • Taking an education loan makes an individual self-dependent and responsible.

Must Read: Tax Benefits on Securing Education Loan

10 Education Loan Rejection Reasons

The following are some of the most common reasons why lenders reject education loans.

  1. Poor CIBIL scores
  2. Poor academic scores
  3. Chosen country for higher studies
  4. Chosen course for higher studies
  5. Insufficient documentation
  6. Unrecognized University
  7. Absence of Admission Letter
  8. Type of Loan
  9. Unfulfilled Language Requirements
  10. Creditworthiness

Poor CIBIL Score

Those who have previously applied for a loan may not be unfamiliar with the CIBIL score. The Credit Bureau of India Ltd., or CIBIL, is the principal governing organization that assesses each loan applicant’s credit score. This is done to determine an applicant’s worthiness to get a certain loan.

Most lenders have very tight standards regarding the CIBIL scores of both college loan applicants and their co-applicants when it comes to education loans. In the majority of cases, a CIBIL score of less than 600 is one of the reasons for an education loan refusal.

Poor Academic Scores

Most of you may believe that applying for an international school loan is simple. That is, of course, not the case. Many students face loan rejection because of poor academic achievement. So, what constitutes bad academic performance in the eyes of lenders? 

  • The loss of a year owing to recurrent failure in particular topics results in the course being discontinued. This notation on a student’s academic record may be interpreted as poor academic performance.
  • The inability to finish your course on time is also considered low academic performance.
  • To qualify for an education loan, most lenders have set specific threshold scores for individuals. Students who completed their degree after receiving less than 60% in their exams have a lower chance of having their education loan application approved by lenders.
  • Being prevented from taking qualifying examinations can also result in education loan refusal.

Chosen Country for Higher Studies

This is one of the primary reasons why many students’ education loan applications are denied. It is critical to recognize that, while many lenders, particularly private ones, promote loan acceptance for any country in the globe, this is not the case in practice. Both governmental and commercial education loan lenders keep a list of certain countries and courses for which an education loan is allowed.

Some of the countries on the lender’s list of the finest places to study abroad include

Students accepted into universities from nations whose education systems have not been rewound face a higher risk of loan refusal, such as-

  • Ukraine
  • China
  • Afghanistan

Chosen Course for Higher Studies

Most education loan providers in India maintain a list of courses for which they grant money. Students who have been accepted into one of these programs are more likely to receive permission from their respective lenders. 

  • STEM courses: STEM stands for Science, Technology, Engineering, and Mathematics. Students who have been accepted to international colleges to study in any of the above-mentioned fields are less likely to have their education loan application denied.
  • Management programs
  • Other postgraduate qualifications Degrees, diplomas, certificate programs, and so on.
  • Courses that will help you get a job

Although most lenders give education loans to students who have been accepted for postgraduate level courses, several of them (private lenders) do not allow education loan applications for MBBS and PhD programs. 

Insufficient Documentation

Frequently, lenders do not disclose explicit reasons why an overseas education loan was denied. One of the most prevalent causes for an education loan rejection is a lack of documentation. 

Documentation is an important aspect of the international education loan process. Especially when it comes to government bank collateral education loans. When pledging any of the seven forms of collateral security against an international education loan, it is critical that you submit the appropriate documentation for the asset being pledged as collateral.

The documentation required for college loans varies by lender. Private lenders, for example, require different paperwork for an education loan without collateral than state banks. 

Must Read: Documents Needed for Education Loan

Unrecognised University

Banks frequently reject education loan applications from students seeking admission to unrecognised institutes or institutes with poor placement records. Students must make certain that they only apply to recognised institutes in the hopes of receiving an education loan. This is also vital for future employers to recognise their degree, and hence their employability. 

Absence of Admission Letter

Before authorizing an education loan, banks require an admission/offer letter (a soft copy is sufficient), the absence of which reduces the student’s chances of receiving one. 

Apply with caution now that you are aware of the most typical reasons why an education loan application may be denied. Of course, you may always apply for an education loan through Fly.Finance and let us handle the loan approval – at no cost to you.

Type of Loan

A secured education loan is more easily approved than an unsecured education loan. A non-collateral education loan is more difficult to obtain, especially if the loan amount is large. Education loans without security are only granted if the student meets certain criteria, such as a good CIBIL score, strong academic achievements, admittance to a reputable institute, original and full paperwork, and so forth. Students requesting secured loans, on the other hand, have their applications refused. Attaching agricultural land as collateral or land under Gramme Panchayat’s jurisdiction is two common causes. Students attaching disputed land, failing to produce past sales deeds if the property has been owned for less than 30 years, and other violations.

Must Read: Types of Education Loans for Indian Students

Unfulfilled Language Requirements

The most widely spoken language in Commonwealth and North American countries is English. Anyone applying for a program at a university in such countries must provide proof of English proficiency in both written and spoken English. Students typically do this by taking the TOEFL and IELTS exams. If a student fails to obtain satisfactory grades on certain tests, he or she is ineligible to pursue higher education or work in those countries.  


Various banks and non-banking financial companies (NBFCs) in India provide unsecured loans to students to help them pay for their higher education. These loans are granted based on the borrower’s creditworthiness and financial strength.

Borrower creditworthiness is determined by numerous factors, including past loan payback history, source of income, CIBIL score, employment prospects after completing the course, and so on. If the lender, in its judgment, determines that the borrower does not match the acceptable creditworthiness standards, the borrower’s school loan application may be refused.

How to Avoid Education Loan Rejection?

Whether you choose education loans for study abroad or in India, the lender will evaluate your student profile based on parameters such as academic scores, entrance exam scores, educational continuity, the pedigree of the university, and course to determine your employability potential. 

Your education loan will be approved if you meet the lender’s predetermined requirements. As a result, it is recommended that you select well-ranked colleges and recognized courses to enable a smooth transition from academics to your job. You can avoid student loan rejection by keeping these characteristics in mind.  

Must Read: 5 Things to Keep in Mind to Apply for an Education Loan


In general, abroad education loans are rejected for small grounds, which may be addressed with expert assistance. Fly.Finance, India’s most popular education loan marketplace, has assisted thousands of students with loan applications. Their professional team of education loan counsellors detects all red flags from the beginning of the process. Most importantly, it offers free expert lending aid! Fly.Finance‘s relationship with several banks and NBFCs boosts the possibilities of abroad education loan acceptance, broadening the options for students and lowering the chances of loan rejection.

Always keep in mind that in the absence of competent guidance and experienced support, the odds of receiving an education loan are slim. Stay one step ahead of the game!


Why would an education loan be rejected?

Reasons for Rejection of Education Loans are Incomplete documentation, a low credit score, poor academic record, insufficient collateral or guarantor, an unrecognized college or course, and other factors that can all lead to education loan rejection.

Can banks reject education loans?

Yes, an education loan request might be denied if the borrower does not meet the lender’s requirements. Academic, economic, or other factors may exist. Banks will not lend to you if the institute where you want to study does not have a solid placement record.

Is it bad if I get rejected for a loan?

Being denied has no negative impact on your credit score. However, if you are refused, it has no further consequences beyond the initial inquiry. Consider lenders who offer prequalification if you’re unsure if you’ll qualify for a loan and want to avoid a hard inquiry.

This was all about the education loan rejection reasons and how you can avoid them. For more information, subscribe to Fly. Finance or connect with our experts for assistance. 

About Vidisha Dewan

Graduated with English as a major, I’m a writing enthusiast. Writing helps me blend my passion and profession to achieve creative satisfaction. Here, you'll find content related to finance: bank accounts, money transfers, loans and more. Still learning about how to handle my own finances better, I keep sharing all the relevant information to help my readers as well. I try to keep my work surroundings creative and fun, with space for constructive feedback.

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