Can you get an SBA loan with defaulted student loans?
Short answer
It depends. A student loan is not a Prior Loss. But an applicant or guarantor with a federal nontax debt 90 days past due is ineligible. Exceptions include a repayment agreement paid as agreed. Source: SOP 50 10 8.1, Sec. A, Ch. 1, Para. E.
It can block you if the debt is a delinquent federal debt. SOP 50 10 8.1, Sec. A, Ch. 1, Para. E has two separate tests, and student loans are treated differently under each.
Prior Loss
The definition of a federal loan for this test excludes a federal loan issued to an individual, such as a student loan. So a student loan default does not create a Prior Loss.
Delinquent Federal Debt
A separate paragraph cites 31 CFR ยง 285.13. It bars an applicant or guarantor who owes an outstanding nontax federal debt in delinquent status. Supplemental guarantors are excepted. The SOP states no student loan carve-out here. A debt is delinquent when it has not been paid within 90 days of the payment due date, even if collection has stopped.
When a debt is not delinquent
- The agency released you, accepted a compromise, or you cured the delinquency on acceptable terms.
- The debt is subject to, or was discharged in, a bankruptcy proceeding, and you are current on any court plan.
- You have a satisfactory written repayment agreement and are paying as agreed.
- The debt is in an administrative or judicial appeal.
Next steps
Lenders must check Credit Alert Verification Reporting System (CAIVRS). If the debt is fully satisfied, the application can proceed. SBA does not routinely grant waivers of this rule.
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