If you’re a student and you have bad credit, but you still want to go to school and get a degree, then there are options for student loans with bad credit.
The first thing you need to know is that there are different kinds of student loans. Some are only available to students who have good credit, while others will give you a chance even if you don’t have any credit at all. The second thing is that there are some steps that you should take before applying for a loan in order to increase your chances of getting it approved.
There are many great things about using student loans with bad credit as opposed to other types of loans. For instance, they don’t require collateral and they have low interest rates so they’re easier on your budget. There’s no need to worry about missing payments because they’re affordable enough so that even if something happens and you can’t pay it back on time or at all then there won’t be any consequences such as late fees or interest charges added onto what was already owed which means no extra money out of pocket either!
If you want more information about how these types of loans work then please check out our website today!
Easy Student Loans For Bad Credit
If you’re searching for a student loan with bad credit or no credit, start with the following steps:
- Calculate how much you need. Your cost of attendance will determine which lenders and types of loans you look for. Federal student loans typically have lower loan limits than private student loans, so you may need to combine multiple loan types.
- Fill out the FAFSA. The Free Application for Federal Student Aid (FAFSA) determines what type of federal aid you may be eligible for, and it’s also required if you want access to federal student loans.
- Compare rates and terms. If you have poor credit, your best bet is applying for a federal student loan. Where private student loans from individual lenders tend to apply restrictive eligibility requirements, most federal student loans don’t even require a credit check. However, if you’re considering private loans, compare rates from multiple lenders to see which offers you the best deal.
- Consider a co-signer. If you have no credit history or your credit score is on the poor side, you should also look into getting a co-signer for your loan. Having a co-signer with a good credit score can improve your chances of being approved for the student loan funds you need, and it may also get you a better interest rate and better loan terms.
Federal student loans should be your first choice for borrowing with no or bad credit. But if there’s still a cost gap to fill, consider private student loan options without credit score requirements.
Having bad credit or no credit doesn’t mean you can’t get a student loan: Federal student loans for undergraduates don’t consider credit in the application process. They do have borrowing limits, though, so you may find you need more money for school than you can get in subsidized and unsubsidized loans.
Here’s the ideal order in which to borrow: If you don’t have access to a co-signer and you can qualify, start with federal subsidized student loans, then borrow up to the maximum in federal unsubsidized student loans. If you’re a graduate student who needs more money for school than what unsubsidized loans provide, you might turn to graduate PLUS loans. These do require a credit check, but there are specific negative marks the government is looking for.
If you learn you have an adverse credit history after you apply for a PLUS loan, you can explain the circumstances that led to it. The government could then determine that you’re eligible for a PLUS loan after receiving loan counseling. Otherwise, an additional option is to get an endorser, similar to a co-signer, that can help you qualify. This process is slightly less rigorous than what you’ll experience if you were to undergo a credit check through a private lender.
If you must turn to private loans and you have bad credit and no co-signer, lenders that consider factors beyond credit are your best choice. Look closely at fees and interest rates, which are often higher than what federal loans charge. It’s best to compare the overall loans’ costs by getting prequalified on the lender’s websites if they allow you to. If you have a very high GPA or high future income potential, a student loan that qualifies you based on major and academic performance could be a strong option.
Compare bad- or no-credit student loan rates in May 2022
|LENDER||CURRENT APR RANGE||LOAN TERMS||MIN. LOAN AMOUNT||MAX. LOAN AMOUNT||BEST FOR|
|Federal student loans||3.73% to 6.28% fixed||Standard repayment is 10 years||None||$7,500 annually for dependent undergraduates, $12,500 annually for independent undergraduates and 100% total cost of attendance for graduate students||Overall student loans|
|Earnest||0.94% to 11.44% variable, 3.24% to 12.78% fixed (with autopay)||Not specified||$1,000||100% total cost of attendance||Flexible repayment options|
|Ascent||1.64% to 11.45% variable, 4.78% to 14.52% fixed (with autopay)||5 to 20 years||$2,001||$200,000||Student loans without a co-signer|
|Sallie Mae||1.37% to 11.48% variable, 3.50% to 12.60% fixed (with autopay)||10 to 20 years||$1,000||100% total cost of attendance||Student loans with a co-signer|
|Credible||1.09% to 11.98% variable, 3.52% to 14.08% fixed (with autopay)||5 to 20 years||Varies||Varies||Loan comparison|
student loans for parents with bad credit
If you need to borrow student loans for your child, parent PLUS loans should be one of the first places you look. These federal student loans allow you to borrow money on behalf of your college-attending child. It covers the full cost of attendance minus any other financial aid the student gets, like grants and scholarships.
For many—especially those with poor credit—federal student loans can be a better option than private debt. They are typically easier to qualify for and everyone receives the same interest rates, no matter your credit. They also come with greater protections, such as more flexible repayment options and forgiveness programs.
To qualify for a parent PLUS loan, you must be the biological or adoptive parent of a dependent undergraduate student who is enrolled at least part-time in school. In some cases, a step-parent may also qualify.
While most types of federal student loans don’t require a credit check, a parent PLUS loan does—but there’s more leeway than you might think. To receive a PLUS loan, you can’t have “adverse credit,” meaning you can’t have the following on your credit report:
- Delinquent account balances totaling more than $2,085 in the last two years; or the same amount in collections or discharged in the past two years
- A tax lien, foreclosure or repossession in the last five years
- Wage garnishment in the last five years
- Write-off of federal student debt in the last five years
- Accounts that have gone into default in the last five years
If you don’t have much credit to your name or your score is low for other reasons, chances are you’ll be approved with ease. There’s no minimum credit score requirement, and everyone who qualifies for a parent PLUS loan receives the same interest rate.
If you have experienced credit concerns like those listed above, all is not lost. You might still qualify for parent PLUS loans, but you’ll need to take extra steps.
Consider Adding an Endorser
If you can’t qualify on your own, you can add an endorser to your application. An endorser, similar to a co-signer, is someone who doesn’t have an adverse credit history and agrees to repay the loan if the parent can’t. The endorser can’t be the child who is benefitting from the loan, but it can be another family member or close friend.
Becoming an endorser does come with risks: The endorser is legally responsible for repaying the loan if the primary borrower doesn’t, and any missed payments or negative marks will also appear on the endorser’s credit. However, if you can’t qualify for a parent PLUS loan individually, adding a trustworthy endorser could help.
If You’re Denied, Submit an Appeal
If you meet all other loan requirements and can prove that your adverse credit history is due to extenuating circumstances, you can submit an appeal to the U.S. Department of Education. While approval isn’t guaranteed, an appeal might increase your chances of qualifying.
For example, if you were denied a PLUS loan because you previously had an account in collections, you might win an appeal if you can prove the account has since been paid off or you’ve consolidated the debt and have a record of recent on-time payments. See more examples of how you might appeal an adverse credit history on the Federal Student Aid site.
If you end up getting an endorser or successfully submitting an appeal, you will need to complete a 30-minute credit counseling session online before the funds are disbursed.
Look to Private Student Loans Next
If you don’t qualify for parent PLUS loans, consider private student loans for parents with bad credit. Private student loans are administered by institutions like banks, credit unions and online lenders. Some private lenders offer parent-specific student loans, but in other cases, private student loans can be taken out by the student and co-signed by a parent or other adult.
For private lenders, a strong credit score and history are a major part of eligibility. If you apply with poor credit, you may not qualify—or if you do, you’ll likely face higher interest rates than you would with federal student loans. If you don’t have enough credit to qualify, you can add a co-signer with good credit to your application.
When shopping for private student loans, it’s a good idea to compare lenders and their requirements. Many lenders allow you to prequalify before completing a full application, so you can see if you might be eligible for a loan before you commit to anything. Since there are no universal standards among private lenders, you might need to take this step with several companies to find a loan you’re eligible for.
4 Alternatives to Student Loans for Parents With Bad Credit
Having bad credit makes it harder to borrow money. If you’re trying to secure loans for your child’s education and are running into problems, there are some things you can do.
1. Look to Grants and Scholarships
Grants and scholarships—free money that doesn’t need to be paid back—should be used before taking out any type of loan. The more free money your child gets, the less money they’ll need to borrow (and pay back).
There are loads of scholarship and grant databases that house billions of dollars of awards. Search for various types of awards based on the student’s race, gender, socioeconomic background, field of study and even general interests.
2. Help Your Child Apply for Loans
Students generally have more options to borrow for college than their parents do—and many lending products for students are designed for borrowers with little to no credit. That means it’s likely easier and cheaper for your child to borrow money for their own education.
For example, most undergraduate students are eligible for subsidized and unsubsidized federal student loans, which have a fixed interest rate of 3.73% for the 2021-22 school year. These loans require no credit checks, don’t enter repayment until after the student leaves school and have flexible repayment plans that can be based on the student’s post-college income.
If you think you’ll have trouble qualifying for a parent student loan, help your child research the options available to them. There will likely be more lending opportunities to choose from at lower rates than a parent with poor credit might find.
3. Work to Boost Your Credit Score
If you’re determined to borrow parent student loans, increase your credit as much as possible before applying. You can do things like:
- Review your credit report for errors. Review your credit report and check it for accuracy. If you find mistakes that are hurting your score, you can submit a dispute with the credit bureau involved. The bureau will investigate the claim to determine if it’s an error, and if it is, the offending mark will be removed.
- Pay off old debt. If you’re behind on payments, consider paying off any old debt you can. Whether it’s an overdue hospital bill or credit card, this is one way to get your score to rebound. You might find that lenders are willing to work with you on a new payment plan if it means they get some money back.
- Lower your credit utilization. Your credit utilization—also known as your debt-to-credit ratio—makes up a significant portion of your credit score. In short, it measures how much of your total credit limit you are spending each month. If possible, keep your credit utilization below 30% to help your credit.
4. Consider Other Ways to Help
If you’re struggling to find ways to pay for your child’s school, see if you can help in other ways. For example, you can reduce college costs by allowing your child to live at home while they’re in school. If you think your child should qualify for more financial aid, you can help them submit an appeal for more money.
If you’ve exhausted your other funding options, consider asking family or close friends to contribute to the costs of college as a last resort. While this isn’t an option for everyone, lean on your network if you’re lucky enough to have family with means.
Before any money changes hands, set up a written agreement (and repayment plan, if necessary) that works for everyone. This can help ensure everyone understands the expectations and reduce misunderstandings later.