– Student Loans for Bad Credit –
Are you in need of college funding? And are you afraid of not getting it because you have a bad credit score? Student loans from the federal government do not require a credit check.
If you’re looking for student loans for bad credit and need options, here are things you should know. Read on.
In this article, you will get to read on;
- How to Shop for Student Loans With Bad or no Credit
- Federal Student Loans for Bad Credit
- Private Student Loans for Bad Credit
- Alternatives to Consider
Always consider federal student loans first, but remember, these loans have limits and may not cover all of your expenses.
After that, you can look into private student loans that don’t require a cosigner or apply for one with a creditworthy cosigner.
How to Shop for Student Loans With Bad or No Credit
Below are some basic things you need to know when shopping for student loans with bad credit;
1. Start with Federal Student Loans
Fill out the Free Application for Federal Student Aid, known as the FAFSA to apply for federal student loans as well as qualify for free aid such as grants, scholarships, and work-study.
They offer lower interest rates and come with income-driven repayment plans and forgiveness programs.
2. Find a Co-signer with Good Credit
To borrow private loans with a co-signer and get the most competitive interest rates, they’ll need to have a good credit score and steady income. If you opt for a co-signer, they’ll be responsible for your debt if you can’t repay it.
3. Find a Co-Signer
Some lenders offer private student loans without factoring in credit scores. Future income potential is usually considered instead. The higher your earning potential, the more likely you are to get competitive rates.
4. Compare Loan Features
When shopping for a private loan, compare offers to get the lowest interest rate you qualify for.
Note whether the lender will postpone payments in case you have difficulty affording them, and for how long. That’s important.
Find out if there are origination, prepayment or late fees, and how easily you can reach the lender.
5. Opt for a Fixed Interest Rate
Given the choice, a fixed interest rate is a safer bet than a variable interest rate. It won’t increase over time.
6. Keep an Eye on the Bottom Line
Use a student loan calculator to see what kind of payment you’ll face after borrowing for multiple years.
7. Consider Refinancing in the Future
Once you’re out of school and have built a credit profile, you may be able to refinance private student loans to a lower interest rate.
You’ll generally need solid income, a credit score of 690 or higher, and a history of on-time debt payments.
Federal Student Loans for Bad Credit
Most federal student loans don’t take your credit score into account when determining eligibility. Instead, the government will simply see if you meet some basic requirements such as being a U.S. citizen or eligible non-citizen and being enrolled in an eligible school.
To determine eligibility, students need to complete the Free Application for Federal Student Aid (FAFSA).
Below, we’ll go over the federal student loans available to students with bad credit.
1. Direct Subsidized Loans
|Loan Type||Fixed Rates (APR)|
|Direct Subsidized Loan||4.53%|
Direct Subsidized Loans are provided by the U.S. Department of Education and are only offered to undergraduate students. These are available to undergraduate students who demonstrate financial need.
What’s great about subsidized loans is that the government pays the interest while the student is still in school at least half-time, as well as during the grace period and periods of deferment.
For subsidized loans, the annual maximum borrowing limit ranges depending on grade level.
2. Direct Unsubsidized Loans
|Loan Type||Fixed Rates (APR)|
|Graduate or Professional||6.08%|
The Direct Unsubsidized Loan is similar to the Direct Subsidized loan except that with the unsubsidized loan, the government does not pay the interest at any point and graduate students are eligible.
While interest rates for undergraduates remain the same, students are eligible to borrow more in unsubsidized loans. Limits range depending on grade level and dependency status.
3. Direct PLUS Loans
|Loan Type||Fixed Rates (APR)|
Direct PLUS Loans can be taken out by parents of students (Parent PLUS) and graduate students (Grad PLUS) to help pay for educational expenses.
PLUS Loans are more similar to private loans than other types of federal loans. These loans do require a credit check and they have higher interest rates and fees than other federal loans.
Even though there is a credit check for the Direct PLUS Loan, requirements can be less stringent than private loans.
The government wants to make sure the applicant has no adverse credit history such as bankruptcy or delinquencies over 90 days.
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Private Student Loans for Bad Credit
Private student loans do require a credit check and most lenders require applicants to have a credit score of 690+ or a creditworthy cosigner.
If you don’t have good credit or a creditworthy cosigner, you can consider options designed for students without a cosigner such as Ascent, Funding U, and MPower.
Rates (APR): 3.16% – 13.16%
Loan Terms: 5, 10, or 15 years
Loan Amounts: $1,000 – $200,000
Ascent offers loans for both undergraduate and graduate students. These loans are provided to both students with cosigners and those without.
Eligibility for Ascent student loans is based not just on creditworthiness but also on individual factors such as what the applicant is studying, which can indicate future earning potential.
The following are some details of Ascent student loans:
- Variable APRs range from 3.16% to 11.90%
- Fixed APRs range from 4.21% to 13.16%
- There are no application fees or origination fees
- Ascent offers a 1% cash-back graduation reward
2. Funding U
Rates (APR):7.99% – 13.49%
Loan Terms: 10 years
Loan Amounts: Not disclosed
Funding U is another company that specializes in providing education loans for bad credit or no credit.
Funding U bases loan decisions on how an applicant is progressing in school and their earning potential. It takes only two minutes to prequalify online at the Funding U website.
The following are some of the loan terms and specifics of student loans from FundingU:
- With AutoPay, the APR is 13.49%
- Loans close in around two to three days
- Students have to be pursuing a bachelor’s degree at a Title IV-eligible four-year college, and for-profit schools aren’t eligible
Rates (APR):Not disclosed
Loan Terms: Up to 10 years
Loan Amounts: $2,001 – $50,000
MPower is a financial institution providing loans for international students, DACA students, and also domestic students. Students can apply for a loan from MPower without having collateral, a credit score, or cosigners.
Details of MPower loans include the following:
- MPower offers loans to more than 190 nationalities including the United States
- Fixed interest rate loans range from $2,001 to $50,000
- MPower works with more than 200 schools
Alternatives to Consider
If you don’t have a good credit score or a creditworthy cosigner and are not interested in any of the above options, you could consider some of the following:
- Scholarships. Applying for scholarships is always a good idea before taking out any student loans—regardless of your credit score. These don’t have to be repaid and are issued based on achievements (such as academic or athletic), financial need, or based on your personal background (such as ethnicity, interest, or location).
- Grants. Like scholarships, grants do not need to be repaid. They are, however, typically based on financial needs. The federal government (ex: Pell Grants), state governments, colleges, non-profits, and other private organizations usually offer grants.
- Work-Study Programs. These programs give students part-time jobs while in college to help pay for their education.
- Your work schedule will be determined based on your class schedule, academic progress, and the amount of the work-study award.
A college education is an investment, but that doesn’t mean you should put yourself in a financially tricky situation to pay for it.
Luckily, there are several federal loan options for students, most of which don’t depend on your credit history to qualify.
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