Best student loans for bad credit or no credit: May 2022

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When shopping for student loans you can use to pay for school, look for a competitive interest rate, repayment terms that meet your needs and minimal fees. Loan details presented here are current as of March 24, 2022. Check the lenders’ websites for more current information. The top lenders listed below are selected based on factors such as student loan interest rates, loan amounts, fees, credit requirements and broad availability. To learn more about how we selected lenders, see our methodology section above.

How to shop for a student loan with bad credit or no credit

If you're searching for a student loan with bad credit or no credit, start with the following steps:

1. 1. 1. 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.
      2. 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.
      3. 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.
      4. 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 vs. private student loans

Borrowers with poor credit can choose between federal and private student loans. Federal student loans are offered by the U.S. Department of Education and set one fixed rate for all borrowers. They also don't have a minimum credit score requirement, so they're the first place to turn if you have a spotty credit history.

Private student loans are offered by banks, credit unions and online lenders. Unlike some federal student loans, they often allow you to borrow up to the total cost of attendance at your school, though you won't have the benefit of income-driven repayment plans or loan forgiveness programs. Private student loans offer a wider range of interest rates that are based on your credit score. 

Here are some of the key differences between federal and private student loans:

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 qualify for lower interest rates. The downside is that the co-signer is 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.

How to improve your credit score for a student loan

If you don’t have a co-signer or you have some time before you need to apply for a student loan, it’s worth figuring out some ways to increase your credit score:

• 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, 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. Consider paying off any late accounts prior to applying for a student loan. Collections accounts stay on your credit report for seven years, which could drastically reduce your chances of being approved for financing.
• 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.

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.

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, research is still important, 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 August 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 said that he would like to forgive $10,000 of student loan debt for all federal borrowers. Student loan forgiveness could potentially happen with either congressional approval or executive action, but widespread student loan forgiveness like Biden originally proposed is unlikely in the near future. Instead, the administration has been concentrating its efforts on improving existing student loan forgiveness programs, like Public Service Loan Forgiveness and borrower defense to repayment. Through these programs, billions of dollars' worth of student loan debt has been forgiven over the past 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:

Next steps

When looking for a student loan with a poor credit score, start with federal student loans, which you can apply for by filling out the FAFSA. If you do need to take out private student loans, consider applying with a co-signer to increase your chances of getting approved and scoring a lower interest rate. The only way to guarantee the lowest rate for your situation is to shop around, so take the time to prequalify with a few lenders before moving forward.