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Can you get a student loan with bad credit?

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Man studies in a college library
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Obtaining a student loan with bad credit can often be a challenge, but it is possible. If you have bad credit, federal student loans are a great place to start, but you can also look into getting a co-signer or finding a lender that uses other factors to determine your eligibility. Here’s how to start.

Options for student loans with bad credit

When you’re shopping for educational loans, any options you review will fit into one of two categories: federal student loans or private student loans. As a borrower with bad credit, you’ll encounter different benefits and drawbacks with each loan type.

Federal student loans

Federal student loans are a form of education financing that’s funded through the U.S. Department of Education. You can use the proceeds from federal student loans to help cover expenses such as:

  • Tuition.
  • Fees.
  • Books.
  • Supplies and equipment.
  • Room and board.
  • Transportation.

If you have credit problems, federal student loans are typically the best place to start. Most federal student loans do not require a credit check to qualify for financing, so bad credit won’t be an obstacle in most cases.

PLUS loans are the one exception; these loans will check your credit, although they’re only looking for an adverse credit history and don’t have minimum credit score requirements.

Federal student loans do have both annual and lifetime borrowing limits, though. As a result, these loans might not be sufficient to cover all of your educational costs.

Private student loans

Private student loans are a type of education financing that’s available through private lenders. Online lenders, banks, credit unions and even colleges and universities themselves may offer private student loans.

With a private student loan, the lender will almost always check your credit as part of the application review process. When you have bad credit, securing a private student loan may be a challenge. Bad credit can also impact the interest rate and loan terms a lender offers you — potentially making it more expensive to borrow money even if you qualify for financing.

Many private student loan lenders will require you to have a minimum score in the mid- to high 600s to qualify for financing. However, the lender may allow you to apply for a private student loan with a co-signer if you are worried that you won’t be eligible on your own. Just keep in mind that co-signing for student loans comes with its own drawbacks, such as the risk of credit score damage for your loved one.

Most of all, it’s important to conduct your own research if you’re considering a private student loan for bad credit. Comparing offers from multiple lenders has the potential to save you money on interest rates, especially with bad-credit student loans. Over time, those savings could add up to a significant amount of cash.

How to improve your credit before applying for a private student loan

Because your credit plays a key role in the approval process, it’s wise to make sure that your credit score is in the best shape possible before applying for a new private student loan. Better credit may improve your approval odds and could help you secure better rates and terms when you borrow money.

Here are four steps you can take if you want to improve your credit.

  1. Check your three credit reports. As you review your credit reports, make a list of any information that seems inaccurate and any negative items you need to address. You can claim a free copy of each of your three credit reports weekly at AnnualCreditReport.com.
  2. Dispute credit errors. Millions of Americans have errors on their credit reports. Some credit reporting mistakes have the potential to damage your credit score. If you discover errors on your credit report, it’s wise to dispute them right away.
  3. Lower your credit card utilization. A high balance-to-limit ratio on your credit cards can be bad for your credit score, even if you make your payments on time. You can lower your credit utilization rate (and likely save money in interest) by paying down your credit card balances. A credit limit increase is another out-of-the-box way that could help you to lower your credit utilization if you can’t afford to pay off all of your balances at once.
  4. Establish positive credit. If your credit file is thin, adding some new positive accounts to it might benefit you over time. Keep in mind that you may want to start with accounts you’re likely to qualify for despite having bad credit or no credit. Secured credit cards or credit builder loans may be worth considering here.

Can you get a student loan with bad credit and no co-signer?

If you have bad credit and no co-signer, likely one of your only options is federal student loans. If you’ve lost federal loan eligibility or you’ve exhausted your allotment, your borrowing options are limited.

However, there are some private lenders that specialize in working with college students who have no credit history or no co-signer. Potential options include:

As with other student loan options, it’s important to shop around and compare offers from multiple lenders before deciding on one.

What to do if you can’t qualify for a student loan

If you’re having a hard time finding student loans because of bad credit, all is not lost. Here are some alternatives to consider.

Income-share agreements

An income-share agreement (ISA) is a student loan alternative that doesn’t require a credit check. Instead of loaning you money based on your credit history, providers will give you funding in exchange for a fixed percentage of your future income — usually between 2 percent and 10 percent — for anywhere between two and 10 years once you start working.

Depending on the agreement and your career results, you may end up paying more or less than the amount you received. This means that you carry some risk, especially if you end up with a high-paying job.

ISAs, which are often offered by colleges and universities, typically set a salary floor, which is what your income must be for payments to come due, as well as a payment cap, which is the maximum amount you have to pay.

If you’re considering an ISA, be sure to read the fine print and compare the terms to similar options to determine if it’s a good fit for you.

Seek other ways to pay for school

As a rule, it’s best to consider student loans as a last resort for college financing. Take some time to research scholarship and grant opportunities at your school. You can also use scholarship search engines to comb through millions of scholarships and grants offered by private organizations.

If necessary, you may also consider taking some time to work to save up for your next academic year and plan to work part- or full time while you attend college. This can be challenging with some degree programs, but it might be worth the effort.

Reduce your expenses

If you qualify for federal student loans but can’t get enough to meet your financial needs, it might be worth considering a less-expensive school. Community colleges can be a great place to knock out general courses before switching to a four-year university to complete your degree.

You can also look for other ways to cut costs, such as living at home or requesting other financial help from your family.

The bottom line

Can you get a student loan with bad credit? There’s a good possibility that you can, and your best bet is to start with federal student loans. But if you need private student loans to help finance your education, bad credit could make borrowing money more difficult and more costly.

Focus on improving your credit as much as possible before you apply for financing. And remember, if you decide to accept an interest rate that you’re not thrilled about now, you can always refinance your student loans in the future.

Written by
Michelle Black
Contributing writer
Michelle Lambright Black is a credit expert with over 19 years of experience, a freelance writer and a certified credit expert witness. In addition to writing for Bankrate, Michelle's work is featured with numerous publications including FICO, Experian, Forbes, U.S. News & World Report and Reader’s Digest, among others.
Edited by
Student loans editor