When to Decline a Student Loan - 5 Tips

Sometimes it's a better option not to take a loan. This article offers some advice for when you should not take a student loan.

Student loans can provide much-needed financing when you can't afford your college costs, but they're not always necessary. Even if you need some money, you don't have to accept the full amount you've been offered. 

Any amount you receive, you'll need to pay back with interest. So it's wise to take only what you need to cover your expenses.


When to Consider Declining a Student Loan

When you borrow money for college tuition and related expenses, no one's going to follow you around, counting every dollar to make sure it's spent wisely. However, just because you do qualify for student loans, it doesn't mean you have to take them.

Student loans are typically disbursed to your college first to cover tuition and fees for the term. If there's any money left over after that, you'll receive a refund check or a direct deposit for the difference.

Here are some tips to help you minimize how much you need to borrow and when to decline a student loan offer.

1. Create a Budget

A budget is fundamental to any successful financial plan. Before you accept federal financial aid or apply for a private student loan option, project what your expenses will look like over the course of your next semester or year. 

If you're a freshman, this can be difficult, especially if you've never lived on your own before. Consider asking a parent or guardian to help you. If you've been in college for a while, you may be able to use previous months and semesters as a guide to help you nail down what you expect your expenses to be.

Creating your budget will help you determine how much money you'll need to get by. If you have a job or you're receiving scholarships or grants, you can deduct these income sources from that figure. It may make sense to have a buffer, though, in case of a financial emergency.

Once you know how much cash you'll need to get through the next term, you'll know how much you'll need to borrow to make it happen.


2. Look for Ways to Cut Costs 

Depending on your situation, there may be opportunities to live more frugally and avoid taking on too much debt. If you're an incoming freshman or open to a transfer, this may start with picking an inexpensive school. 

In some cases, it can even be wise to start at a community college and get your general courses out of the way, then transfer to a public or private college or university after that.

Other ways to cut costs include living at home, living with roommates and choosing lower-cost housing further away from campus.

3. Maximize Scholarships

You may have already qualified for scholarships from your school. Whether it's need-based or merit-based, it's not the only way you can get free money to attend college. 

Websites like Scholarships.com and Fastweb provide databases of millions of scholarship opportunities, which means there are likely several that you're eligible to receive. These scholarships come from private organizations and can have varying requirements. 

In fact, Juno offers a $1,000 scholarship to a lucky student every September. Simply share your favorite story that highlights your negotiating skills, and you'll be entered to win.

Take some time every day to research and apply for scholarships, so you can maximize the amount of financial aid you receive that you won't have to pay back.


4. Know Which Loans to Decline

If you're an undergraduate student, you may qualify for both subsidized and unsubsidized student loans from the federal government. For the most part, these loan programs are the same. The only difference is that with subsidized loans, the federal government pays any interest that accrues while you're in school, as well as during future periods of deferment. 

If you qualify for both types of loans and you don't need the full amount, be sure to decline the unsubsidized loans, so you can take advantage of the extra aid while you're in school.

Before you accept even subsidized loans, though, make sure you're taking advantage of all other types of financial aid that you won't have to repay. 

Note that you can also request a lower amount than what you initially qualify for. 

5. Know That You Can Change Your Mind

You may be tempted to take all of the loan money you're offered just to be safe. After all, you can't predict everything, and unexpected expenses can come up and cause added stress. 

The good news is that if you reject a student loan and then change your mind later in the same academic year, you can reinstate your loan. The same goes if you took less than you actually qualify for — you can increase your loan amount later on. 

Also, you have the option to cancel a loan that's already been disbursed within 120 days of the disbursement date. If you do this, you'll need to return the money you received, but you won't be charged interest or fees on the loan amount.

With this in mind, you can have more confidence in your decision to decline a student loan or take less than what the federal government is offering.


How to Decline a Student Loan

The process can vary from school to school, but you'll generally get the information you need on how to accept, decline or decrease your student loan offer in the financial aid award letter that you receive from your college or university.

If you're having trouble or you're not sure how to decide, you can call or visit your school's financial aid office to talk about your options and determine the best step forward. 

The Bottom Line

Declining a student loan is a relatively simple process, but the decision to do so can be more complicated. The important thing is that you run the numbers to determine how much you need and take advantage of opportunities to get money you don't have to repay. 

And whether you accept a student loan you don't need or decline the financial aid, keep in mind that you can change your mind later, as long as you do so within the allotted time. 


Juno can help you to find a student loan or refinance a loan at the most competitive possible rate. We get groups of buyers together and negotiate on their behalf with lenders to save them money on private student loans and private student loan refinance loans. 

Join Juno today to find out more about your options for affordable private student loans to help fund your degree.


Ben Luthi
Written By
Ben Luthi

Ben Luthi is a personal finance and travel writer based in Salt Lake City, UT. He loves helping people better understand their finances. When he's not traveling, Ben enjoys spending time with his kids, hiking, and watching films. His work has been featured in U.S. News & World Report, The New York Times, MarketWatch, Fox Business, and many other publications.

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