Wolverines coach Brady Hoke said Michigan is appealing the denial. Isaac announced in June that he would attend Michigan after electing to leave USC.
If the appeal is denied, Isaac will have three years of eligibility remaining beginning in 2015 after sitting out the upcoming season.
Isaac filed the waiver after transferring from USC to a school closer to his mother, who is based in Shorewood, Ill., and recovering from a surgery that prevents her from flying.
The NCAA typically doesn't grant waivers if the family member in question doesn't live within a 100-mile radius of the player's new school. Shorewood is approximately 260 miles away from Ann Arbor, Mich.
Isaac, a former five-star recruit from Joliet, Ill., rushed for 236 yards and two touchdowns on 5.9 yards per carry in 14 game for the Trojans last season.
Michigan opens the 2014 season Saturday against Appalachian State.
- Chris Johnson