Summary: Student loans for bad or no credit in November 2021
Can you get a student loan with bad credit?
It is possible to get a student loan even if you have bad credit or no credit history. That said, it will be more difficult to qualify, and rates will be higher. Federal student loans are the easiest to qualify for, since most won't do a credit check and don't consider your credit score, and interest rates are the same for all borrowers. If you need to
borrow private loans, you can look for lenders that have low credit score requirements, take other eligibility requirements into account or let you add a co-signer to your loan.
Student loan options for parents with bad credit
Parents with poor credit still have options to help finance their child's undergraduate or graduate degree. Parents should start first with a federal parent PLUS loan, which comes with some federal benefits and can cover up to the total cost of a child's education. Eligibility requirements for a parent PLUS loan are
less stringent than those of private student loans, so parents with bad credit can still get approved; however, adverse credit history like defaults, foreclosure or bankruptcy will make it harder to qualify. Parents can also look into private student loans. Many lenders have student loans designed for parents, many of which cover up to the full cost of a child's education and feature flexible repayment options. However, most private lenders have a minimum credit score requirement, so if you do go this route, look for lenders that accept borrowers with poor credit or those that take other factors into account. Parents can also apply for a loan with a creditworthy co-signer.
How to improve your credit score for a student loan
- Pay all of your bills early or on time. Your payment history is the most important factor in determining your FICO Score. Late payments are detrimental to your credit health, but making on-time or early payments on all of your bills can boost your credit score over time.
- Pay down other types of debt. The more debt you pay off, the lower your credit utilization will be, which makes up 30 percent of your FICO Score. If you have several types of debt, focus on high-interest debt and unsecured debt like credit cards first.
- Get a new credit account. If you don’t have any credit history, sign up for a starter credit card. If you use your credit card to make small purchases and pay it off each month, you’ll build positive credit habits and your credit history at the same time.
- Pay off accounts in default or collections. Finally, consider paying off any late accounts. Collections accounts stay on your credit report for seven years, which could drastically reduce your chances of being approved for a student loan.
- Dispute credit report errors. Mistakes can happen, which is why it's smart to regularly check your credit reports and dispute any errors that could be negatively affecting your credit score. You can check your credit reports for free at AnnualCreditReport.com.
Details: Student loan rates for bad or no credit in 2021
While college loan lenders for bad credit can’t offer the best rates and terms, they do make it possible to borrow money you can use to pay for school. We compared the top loan options for bad credit to help you figure out which lender might work best for your needs and goals.
Applying for a student loan with a co-signer
A co-signer is a creditworthy friend or family member who takes on the responsibility of the loan with the borrower. Their creditworthiness can make it easier for the primary borrower to get approved for the loan and and qualify for lower interest rates. The downside is that the co-signer is equally as responsible for paying the loan if the primary borrower misses payments, and delinquency could affect the co-signer's credit score.
Many lenders have the option for co-signer release, which allows the borrower to release the co-signer from their obligation after a certain number of on-time payments are made.
Student loans in the coronavirus pandemic
Like other financial products, student loans have been affected by the coronavirus pandemic. Interest rates are at near-record lows, making this a good time to take out a new loan or refinance old private loans.
While these interest rates are low, students should still do their research, says Mark Hamrick, senior economic analyst at Bankrate. "Whether looking at federal or private student loans, meaning looking at loans offered by the government or business, potential applicants should do their homework when it comes to finding the lowest interest rates available." This is particularly important if you have bad credit, as some private lenders have tightened their credit requirements in response to the low-rate environment.
The federal government has introduced its own relief options for federal student loans, as well. Through Jan. 31, 2022, borrowers with federal student loans are not required to make payments, and interest charges are waived.
President Biden's student loan forgiveness proposals
On the campaign trail, President Biden mentioned two forms of forgiveness: one-time relief of $10,000 for all federal student loan borrowers and yearly $10,000 relief for federal student loan borrowers who participate in national or community service, up to five years total.
Student loan forgiveness could potentially happen with either congressional approval or executive action. However, because student loan forgiveness is not included in Biden's 2022 budget proposal, executive action is the more likely scenario – and Biden's authority to pursue that action is still under debate.
Instead of widespread student loan forgiveness, the administration has been concentrating its efforts on improving existing student loan forgiveness programs, like total and permanent disability discharge and borrower defense to repayment. Through these programs, billions of dollars' worth of student loan debt has been forgiven this year.
Should you still make student loan payments while waiting for forgiveness?
Student loan forgiveness is not guaranteed; if you stop making your student loan payments in the hopes that your loans will one day be wiped away, you could be setting yourself up for financial trouble.
That said, there's little harm in taking advantage of administrative forbearance now, especially if you're having trouble paying other bills. Because federal student loan payments are not required, you could temporarily pause those payments and instead put the money toward your private loans, credit card debt, an emergency fund or day-to-day bills.
The most valuable college majors
While you should never make your college major decision based on cost alone, doing research about your potential return on investment can help you make an informed decision about paying for college. In a Bankrate study of the most valuable college majors, STEM degrees earned the top 25 spots, while arts degrees fell near the bottom.
With that said, the value of your degree ultimately depends on the cost of your classes, the need to pursue a master’s degree or doctorate and your personal fulfillment with your degree. It will be tougher to pay off student loans if you start your career with a low income, but your career choice could be worth it.
In terms of the raw numbers, these top five most valuable college majors could help steer your college decision:
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