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6 Student Loans for Bad Credit: Federal and Private
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Student loans for bad credit can potentially allow teens and 20-somethings with thin credit files to borrow for college and graduate school. These loans can also help parents with poor credit histories borrow on behalf of their college-age kids.
Fortunately, a credit check isn’t necessary to borrow the most commonly awarded federal student loans (Direct Unsubsidized and Subsidized Loans). And even private student loans for bad credit are accessible, albeit at typically higher interest rates than what you’d be quoted when applying with a creditworthy cosigner.
Let’s take a look at…
Here are your top options for student loans for bad credit, from federal to private lenders:
|Lender||Interest rates (fixed)||Credit requirement|
|Federal: Direct Subsidized Loan||3.73%||N/A|
|Federal: Direct Unsubsidized Loan||3.73%-5.28%||N/A|
|Federal: Direct PLUS Loan||6.28%||Have better than “adverse” credit history|
|Private: Ascent||4.62% - 15.18%||Varies|
|Private: Earnest||4.49% - 13.95%||650 credit score|
|Private: College Ave||3.99% - 14.96%||660 credit score|
Before applying for private student loans, it’s generally wise to check out federal student loans first.
Federal student loans tend to have the lowest interest rates, plus they come with a variety of repayment plans and protections.
Also, federal student loans (except PLUS Loans) don’t require a credit check. You can consider these viable student loans for bad credit since they don’t have credit requirements.
That said, you need to meet other criteria to be eligible. You need to be a U.S. citizen or qualifying noncitizen, for instance. Plus, you need to be enrolled in a qualifying school.
To access these loans, you have to submit the Free Application for Federal Student Aid (FAFSA). Once you do, you could be eligible for the following three types of loans.
Federal Direct Unsubsidized Loans are not based on financial need, so any student can qualify for them.
For the 2020-2021 school year, all Direct Unsubsidized Loans came with a fixed interest rate of 2.75% for undergraduates and 4.30% for graduate students. For loans disbursed between Oct. 1, 2020, and Oct. 1, 2021, there was a 1.057% fee.
These loans also come with federal borrowing limits. Undergraduates can take out up to the following amounts in Direct Unsubsidized Loans each year:
- Freshman year: $5,500 for dependent students; $9,500 for independent students
- Sophomore year: $6,500 for dependent students; $10,500 for independent students
- Junior year and beyond: $7,500 for dependent students; $12,500 for independent students
Graduate students can take out up to $20,500 per year, with a lifetime limit of $138,500. This limit includes any loans taken out as an undergrad. Although these loan limits apply to everyone, the amount you can take out is ultimately up to your college’s financial aid office.
Your financial aid package will tell you how much you can take out, along with any offers for other student loans, grants, scholarships or work-study. You’re not obligated to take out any specific loan amount.
Before signing on for this debt, make sure to use a student loan payment calculator to estimate your future monthly payments. Student loan calculators can also reveal how much interest your loans will accrue over the years.
By taking the time to learn the details of repayment, you’ll be better prepared to manage your student loans.
While anyone can take out Direct Unsubsidized Loans, only undergraduate students with financial need can take out Direct Subsidized Loans. These loans have an advantage over unsubsidized ones because the government covers the interest that accrues while you’re in school.
As a result, your balance upon graduation will look the same as it did when you first took the loans out. The government will also cover the interest if you ever put your loans into deferment.
Direct Subsidized and Unsubsidized Loans come with a fixed interest rate of 2.75% for undergrads, and grad students can access Unsubsidized Loans at 4.30%.
The subsidized loan borrowing limits for undergraduates are the same for dependent and independent students:
- Freshman year: $3,500
- Sophomore year: $4,500
- Junior year and beyond: $5,500
Like Direct Unsubsidized Loans, you can consider Direct Subsidized Loans as legitimate student loans for bad credit, since they don’t require a credit check.
PLUS Loans typically go to parents, graduate students or professional students. Although PLUS Loans do require a credit check, the requirements aren’t as stringent as those among private lenders.
Most private lenders, for instance, want to see a good or even excellent credit score. But for a PLUS Loan, all you have to do is show that you don’t have an adverse credit history.
The Office of Federal Student Aid defines an adverse credit history in the following way:
- You have a debt of $2,085 or greater that’s more than 90 days delinquent or has been placed in collections within the past two years.
- You’ve had a default, bankruptcy, foreclosure, repossession, tax lien, wage garnishment, or write-off of federal student loans in the past five years.
PLUS Loans don’t necessarily call for an amazing credit score; they just require that you haven’t had any major financial issues in the past few years. If you do have a history of default or bankruptcy, you can still qualify for a PLUS Loan by applying with a creditworthy endorser.
If you qualify, you can borrow up to the cost of attendance minus other financial aid.
Although the government is a great source of student loans for bad credit, you might find yourself unable to cover the full cost of attendance.
If you still have a gap in funding, you could consider a private student loan. Private student loans get tricky, though, because they typically require at least decent credit.
Most private lenders run a credit check, where they consider your income, debt-to-income (DTI) ratio and history of debt repayment.
Student loans for bad credit can be difficult to find. That said, you can apply with a creditworthy cosigner, such as a parent. According to data firm MeasureOne, 91% of undergraduate students apply for a private student loan with a cosigner.
|Have a cosigner joining your private loan application?|
|Best private student loans for you — find them now|
If you don’t have a cosigner, check out the following lenders that offer student loans for bad credit. These lenders do offer some of the most competitive terms and easiest application processes.
Best for: Student loans for bad credit when you can’t find a cosigner
- Fixed and variable rates
- Loans from $2,001 up to 100% of your school’s cost of attendance
- Available to students enrolled at least half-time
- Accessible to those who are part of the Deferred Action for Childhood Arrivals (DACA) program, other noncitizen students who apply with a U.S. citizen or permanent resident cosigner
No application fee or prepayment penalty
Interest-rate reduction (0.25%) if you automate your monthly payments
Repayment terms of 10 years — with a graduated repayment plan available upon leaving school
Three in-school repayment options for qualifying borrowers: deferred payment, fixed $25 payments and interest-only payments
Expansive deferment and forbearance options in cases of returning to school, serving in the military, working a residency or internship and experiencing hardship
Receive a 1% cashback bonus upon graduation
To qualify for the non-cosigned loan, you must be a U.S. citizen or permanent resident; be an upperclassmen or graduate student; have a 2.9 or better GPA; and have two or more years of credit history
Not all schools are eligible at Ascent
Borrowers and cosigners are required to take a federal loan-like “financial wellness” course
Must make 12 full, consecutive interest-and-principal payments in order to release your cosigner (if you have one)
Full lender review: Ascent
Best for: Borrowers who could benefit from an underwriting process that considers nontraditional factors, such as savings history and career trajectory
- Fixed and variable rates
- Loans from $1,000 up to 100% of the school-certified cost of attendance
- Available to undergrads and to graduate students pursuing a law, medical, business or other eligible degrees
- Accessible to noncitizen students who have a Social Security number (SSN) and a creditworthy cosigner
An interest-rate reduction of 0.25 percentage points if you set up monthly payments via automatic debit
Repayment terms of 5, 10, 15, 20 years
Four repayment options to choose from while you're in school and during your grace period: deferred, fixed, interest-only or full payments
Borrowers receive a nine-month grace period after leaving school
Borrowers can skip a payment once per year
Deferment available for borrowers in the military
You may not get to choose from all of the five repayment term possibilities, depending on your application
Cosigners on undergraduate loans must have an income of at least $35,000 and a credit score above 650
Cosigner release not available
Loans not available in Nevada
Full lender review: Earnest
Best for: Student loans for bad credit – for parents borrowing on behalf of their kids
- Fixed and variable rates
- Loans from $1,000 up to 100% of the school-certified cost of attendance
- Loans for undergraduate and graduate students as well as parents
- Available to international students with a SSN who apply with a U.S. citizen or permanent resident cosigner
No application, origination or prepayment fees
Interest-rate reduction if you set up automatic payments
Parent repayment options of 8, 10, 15 years
Option for parents to make full, interest-only or interest-plus payments while their student is in school
Up to $2,500 can be deposited into a parent's bank account to pay for student's education costs
Students are required to apply with a cosigner — with the minimum credit score requirement set at 640
Cosigner release isn't available until the repayment term's halfway point
Repayment protections like forbearance aren't clearly defined by the lender
Full lender review: College Ave
Other private lender options for student loans for bad credit
LendingTree recommends the three private lenders above because they keep their credit score requirements lower than competitors while still offering low interest rates. If you can’t meet their credit criteria and are willing to stomach potentially higher rates, also consider:
- Chicago Student Loans by A.M. Money: Fixed interest rate loans awarded on merit, with federal loan-like option of income-based repayment
- Funding University: Fixed rate loans for undergraduates without cosigners
- MPower Financing: Fixed rate loans for DACA and international students without cosigners, collateral or credit history
Along with these lenders, you might also search for student loans from credit unions or even your college. Some lenders allow you to apply for a quick rate quote, so you can get a sense of preliminary offers before submitting a full application.
Just watch out for lenders that promise no credit checks whatsoever. Their loans could be tagged with hidden fees and, worse, extremely high interest rates.
By shopping around for federal and private student loans, you can find the loan with the most competitive rate, as well as flexible repayment terms and good customer service.
If your credit history leaves something to be desired but you’re in need of education financing, your head could be spinning with questions. Let’s answer at least some of them:
- Can you get student loans with bad credit?
- What should I do if I can’t get approved for a student loan?
- Which lenders offer student loans for bad credit?
- What credit score do you need for private student loans?
- How would applying with a cosigner help a student loan application?
- Are there student loans that don’t include a credit check?
Yes, as discussed above, you can get a student loan with no credit. For one thing, most federal student loans don’t involve a credit check. These include Direct subsidized and unsubsidized loans for undergraduates, as well as Direct unsubsidized loans for graduate students.
The only federal loans that consider your credit at all are PLUS loans for parents and graduate students. These loans don’t require excellent credit, but rather just a check that you don’t have “adverse credit.” And even if you do, you can still qualify by applying with an endorser.
While you can’t get a private student loan with no credit, you may be able to qualify if you apply with a creditworthy cosigner.
It may also be worth looking into income-share agreements, although these aren’t always good for everyone. Unlike student loans, ISAs provide funding for your education in exchange for a certain percentage of your future income for a set period of time. Check out our guide on ISAs to learn more.
Before turning to private student loans, it’s useful to max out your eligibility for federal student loans. Not only do most federal student loans not require a credit check, but they also come with more flexible repayment plans than private student loans typically have.
If you can’t get approved for a private student loan on your own, look into whether you can apply with a cosigner. If this isn’t a possibility, speak with your school’s financial aid office to find out about any alternative options. It could also be worth looking into ISAs as an alternative to student loans. (See FAQ “Can you get a student loan with no credit?” above)
Technically, the Department of Education provides student loans for borrowers with bad credit, as its Office of Federal Student Aid doesn’t even check your credit report in most cases. If you maximize your federal loan allotment and need to borrow private student loans for bad credit, there are some lenders that either require you to apply with a cosigner or lower their bar for qualification on your own. Just keep in mind that applying for bad-credit loans without cosigner support almost certainly means you’ll face higher interest rates, increasing your cost of borrowing.
The credit score needed for student loans varies by lender. Ascent, for example, sets the minimum at 540, while the majority of its competitors won’t lend to borrowers with credit scores below 650. Here are some guidelines to follow:
|Mid-600s or lower||You may have to resort to student loans for bad credit, though applying with a cosigner could help|
|Mid-600s to 690||You might be able to qualify on your own, but expect to face high interest rates|
|690 to 720||You should be able to gain lender approval and access middling interest rates|
|720 and up||You could be able to access the lowest fixed and variable rates you see advertised online|
Even if you could qualify on your own for student loans for bad credit, applying with a cosigner could help you score a lower interest rate. That could mean saving hundreds or thousands of dollars in interest over the course of repayment.
The majority of federal student loans don’t require a review of your credit score or report. Additionally, there are some private lenders, including Funding University and MPower Financing, that make loans for students regardless of their credit file.