Is it possible to get a student loan with bad credit?
“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
“Verified by an expert” means that this article has been thoroughly reviewed and evaluated for accuracy.
BLUEPRINT
Published 12:19 p.m. UTC Nov. 30, 2023
Editorial Note: Blueprint may earn a commission from affiliate partner links featured here on our site. This commission does not influence our editors' opinions or evaluations. Please view our full advertiser disclosure policy.
FG Trade, Getty Images
When you don’t have strong credit, getting approved for loans can seem challenging. That includes when you’re seeking a student loan. The good news is that even if you don’t have a good credit score today, there are still loan options left to explore. That’s because there are many different types of student loans available and the credit requirements vary by lender.
Can you get a student loan with bad credit?
The short answer is yes. Unlike other types of loans, bad credit doesn’t automatically bar you from getting a student loan. Having a good credit score — which is 670 or greater using the FICO scoring model — however, gives you access to more loan options and potentially a lower interest rate.
This is especially true because requirements and approvals vary between lenders. For instance, in the case of federal student loans,there generally is no credit score requirement (with the exception of the Plus loan and the Parent loan, which involve a credit check). Also, certain private lenders don’t consider a credit score, according to Margaret Poe, head of consumer credit education at TransUnion.
“They may look at other factors, including academic achievements, to determine loan eligibility,” said Poe. “These lenders may limit the maximum loan amount or only approve loans for college students who are juniors and seniors. “But the important thing to remember: There are options for students with limited or no credit history.”
Laurel Road
How to get a student loan if your credit isn’t the best
Below are two ways to get a federal or private student loan with bad credit.
Consider federal aid first
The William D. Ford Federal Direct Loan Program offers a few student loan options for student borrowers. Undergraduate students might qualify for Direct Subsidized and Unsubsidized loans, both of which don’t require a credit check.
Graduate and professional students might be eligible for Direct Unsubsidized Loans or Direct PLUS Loans. Direct PLUS Loans, however, do involve a credit check. While your credit won’t necessarily prevent you from qualifying, you must not have an adverse credit history. In cases where this presents a problem, there are certain additional eligibility requirements that can allow applicants to still qualify.
Federal loans offer fixed rates, flexible repayment plans, and are eligible for federal student loan forgiveness programs. To apply for federal student loans, submit a Free Application for Federal Student Aid (FAFSA).
Apply with a co-signer
Some students don’t qualify for federal student loans or may have reached federal student loan borrowing limits. If you need a private student loan but have bad credit, having a co-signer might help you get approved.
A co-signer, ideally who meets the lender’s income and credit criteria, is another person whose name is on the student loan. Co-signers can’t use the loan funds, but they agree to pay the debt if you don’t make your payments.
This arrangement helps assure lenders by strengthening the likelihood the loan will get paid and it also might help you secure a lower interest rate.
There are caveats of being a co-signer, however, including the repercussions in the aftermath of non-payment.
“As a co-signer, you become financially and legally responsible for paying back the loan should the student fail to do so,” said Poe. “In other words, there’s a potential impact on your credit for both parties: the borrower and the co-signer. Because two parties are essentially commingling finances, failing to practice healthy credit behaviors could naturally cause tension in the relationship.”
Some lenders, such as Sallie Mae and SoFi, offer a co-signer release option. This feature lets primary borrowers remove a co-signer from their loan agreement after meeting the lender’s requirements. For example, making a minimum number of on-time, consecutive monthly payments, agreeing to another credit check and providing proof of adequate income.
A co-signer release can be advantageous if your credit score and finances have improved since you first borrowed the loan.The benefits of a co-signer release include that the borrower can absolve the co-signer of further liability from the debt. In releasing the co-signer, any future adverse behavior on the borrower’s part won’t negatively impact the co-signer. Taking this step also eases potential strain or tension in the relationship due to the associated debt.
Alternatives if you can’t qualify for a student loan
Depending on your situation, you might not qualify for a federal or private student loan. There are still options, however, that can help you pay for school.
Scholarships
A scholarship is gift aid that is awarded based on merit, financial need, affiliation or a special skill or talent. You can find scholarships through your institution, local and national organizations, private companies and other sources. Search for scholarships through free sites, like Fastweb and The College Board.
Grants
Grants are another type of aid that you typically don’t need to pay back. You can find these aid programs through your school, state or federal government, as well as some third-party organizations. The Pell Grant, for example, is a useful federal program that does not require repayment. But there are qualifications to be accepted for a Pell Grant.
Work-Study
The Federal Work-Study program offers part-time employment to students who exhibit financial need on their FAFSA. It’s accessible to part- or full-time undergraduate and graduate students. The program has employment requirements and restrictions you’ll need to meet.
Part-time job
If the limitations of Work-Study don’t work for your aid needs, consider getting part-time employment independently. Many full-time students shoulder a part-time job to help cover day-to-day costs during the academic year. You can search for part-time opportunities on campus and in the local community through physical and online job boards. The gig economy is another option for part-time work that may even fit into your student schedule more easily.
There’s no minimum credit score for federal student loans. Private student loan lenders have their own credit criteria that may vary from one lender to another. In general, a higher score can improve your likelihood of approval and at a better interest rate.
Generally, yes. Since federal student loans don’t require a credit check, they can be easier to qualify for than private student loans. If using loans to finance your education is inevitable, apply for federal loans first. In addition to being easier to qualify for, federal student loans offer generous benefits and access to greater student loan relief programs that often don’t come with private loans.
The best option to get a student loan if you have bad credit and no co-signer is through the federal student loan system. The Department of Education offers loans for eligible undergraduates, graduates and parents of dependent undergraduate students.
Yes. Sallie Mae is a private student loan lender that runs a hard credit check for its applicants. It takes this step to evaluate your borrowing history and repayment habits on past and active debts.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
