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If you’re trying to take charge of your debt by refinancing your student loans, you know it can be tough. After all, getting denied can be frustrating.
One of the most common reasons lenders reject applicants is because they did not attend a Title IV-qualifying institution.
Title IV is an important distinction for schools, and whether or not your school fits the criteria can have long-lasting implications for you. Find out what this classification means and why lenders are so stringent about it.
Title IV of the Higher Education Act
President Lyndon Johnson signed the Higher Education Act of 1965 to create protections for college students and to make college more affordable. It also increased the number of government dollars allocated for federal loans, scholarships, and more.
One of the most significant parts of the law is the Title IV section. It’s designed to ensure that a school provides quality instruction and can help students secure a good job after graduation.
Title IV schools are the only institutions where individuals are eligible for federal student aid. Attendees of these colleges can receive student loans, grants, and enter a federal work-study program.
How schools become Title IV universities
The requirements for a school to become a Title IV college are rigorous. To be eligible, the state where the school is located must authorize it to offer postsecondary educational degrees.
An agency approved by the Secretary of Education must grant accreditation after reviewing the school’s curriculum and the university must only accept students who have a high school diploma or GED.
Public, private, for-profit, and vocational schools can become Title IV educational facilities. In the case of vocational schools and private colleges, the school must have a license and offer the same postsecondary programs for at least two years before they apply. Schools also have to submit financial audits to prove they adhere to auditing standards.
If it’s a for-profit institution, the school cannot have applied for bankruptcy protection. The Department of Education requires schools to issue some sort of a degree, such as an associate’s or a bachelor’s.
In the case of vocational schools, the credential must be able to be used to get gainful employment. That means that most graduates must be able to provide for themselves and keep up with their debt payments with a job after graduation.
The application process can take years, and not all schools who apply get approved. Many schools are in operation that don’t fit into this classification, so it’s a serious factor to consider when evaluating your college options.
Why do lenders require schools to be Title IV?
If you’re looking to refinance your student loans, most lenders require that the school you used your student loans to attend is a Title IV institution.
That’s because this classification is a measure of your degree’s validity and value. When reviewing schools, the Department of Education looks to see if the college’s degree programs prepare students for gainful employment.
The Department of Education and refinancing companies look at the gainful employment rate to determine if graduates can reasonably repay their student loans. If their degree only leads to minimum wage work, graduates are unlikely to be able to repay their debt. That means they’re a less appealing candidate to lenders.
Most lenders require borrowers to graduate from a Title IV school as a safeguard. If your school was not a Title IV college, you are less likely to find well-paying work and will be unable to afford your debt.
How to find out if your school is a Title IV institution
If you’d like to find out if your school is a Title IV institution or not, search for it on this list. For borrowers who did not go to a Title IV school but still want to refinance their loans, you have few options.
Lenders like SoFi, LendKey, and College Ave all require borrowers to graduate from a Title IV school. However, Citizens Bank is one of the few financial institutions who will work with you if your school isn’t on the list. So check with Citizens Bank to see if you are eligible. Otherwise, refinancing your loans may not be an option.
Your school’s accreditation matters
While lenders can be rigid about their eligibility requirements, it’s for a good reason.
A Title IV classification means that graduates are more likely to find solid employment and be able to repay their debt. Schools that do not meet the criteria may produce degrees that are not valuable in the workforce. That can limit your career opportunities and earning potential.
For more information about student loan refinancing, here are 10 questions you should ask before you refinance.
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