Student loans for bad credit — here are your best options

There are many student loan options for bad credit borrowers. Learn about them here, including federal loans and private loans. (iStock)

Many students need to borrow money to complete their education, but you may be worried about your ability to do that if you have a low credit score or no credit history.

The good news is, your imperfect credit shouldn't deter you as there are many options for student loans for bad credit. In fact, depending on your situation, you should likely be able to qualify for federal student loans at an affordable rate as well as for private student loans either with or without a cosigner.

Where can I get a student loan with bad credit?

While it may take a little extra effort to find the loan that's right for you, it's worth exploring the loans available to you so a lack of financing doesn't derail your efforts to achieve your academic goals. There are at least three loan options you can consider if you have bad credit scores.

  1. Private student loans
  2. Private student loans with cosigners
  3. Federal student loans

1. Private student loans

While some private lenders require cosigners for borrowers who have low credit or no credit history, not all do. In fact, there are private loan lenders that cater to bad credit borrowers and that are willing to look at other metrics, such as your job prospects after graduation.

You can explore these options by visiting Credible to see which lenders may be open to providing you with an affordable loan even with your current credit report.

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2. Private student loans with a cosigner

Private student loans don't offer the same borrower benefits as federal student loans, but they can still be a good option if you have exhausted eligibility for federal aid. However, private lenders generally have stricter credit and income requirements for those who can qualify.

If you have a low credit score, one of the best ways to get an affordable private student loan is to apply with a cosigner. A cosigner with a better credit score could make it possible for you to obtain a loan you'd otherwise be denied or to get a much better interest rate so borrowing becomes more affordable.

To see what you'd pay on a private student loan, either with or without a cosigner, you can visit Credible today to compare fixed and variable rates from multiple lenders at once with no impact on your credit score.

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You can also use an online student loan calculator to determine both monthly payments and total repayment costs at different interest rates.

3. Federal student loans

Federal student loans are the best option for borrowers with imperfect credit because your credit score doesn't matter for most loan types.

Direct Subsidized Loans and Direct Unsubsidized Loans are available regardless of your credit history at low fixed rates that are the same for every borrower each academic year. You can also qualify for a Direct Consolidation Loan regardless of credit, which allows you to group multiple existing federal student loans into one new loan with more flexible repayment options.

Direct PLUS Loans are another federal loan option, but while these aren't available if you have adverse credit, there's a very specific definition of what that means. "Adverse credit" includes having outstanding debts with a combined balance of $2,085 or higher that are at least 90 days delinquent or in collections or having a foreclosure, repossession, bankruptcy, tax lien, default, wage garnishment, or write-off of federal student debt within the past five years. And even if you have black marks on your record that qualifies you as having adverse credit, you could still obtain a PLUS Loan if you document extenuating circumstances or find an endorser without these issues.

To obtain any of the federal student loans available to bad credit borrowers, you'll need to complete your Free Application for Federal Student Aid (FAFSA). There are annual and lifetime borrowing limits for subsidized and unsubsidized loans. Subsidized loans also require you to show financial need, although neither of the other two types of federal aid is means-tested.

What credit score do you need to get a student loan?

The specific credit score you'd need to get a student loan is going to vary depending on the kind of loan you're applying for.

When you apply for Direct Subsidized or Direct Unsubsidized Loans, your credit score doesn't matter. You can have a very low credit score or no credit history at all and still be approved.  These federal student loans are not credit-dependent and have many borrower benefits, including low fixed-interest rates, regardless of your credit history.

When you apply for a Parent PLUS loan, things work a little differently — but you still don't need to meet any minimum credit score requirements. See, Parent PLUS loans aren't available if you have "adverse credit," but that's not defined as having a score below any particular threshold.

Instead, you're considered to have adverse credit if you have certain black marks on your credit history. These include, but aren't limited to, a record of payments that are more than 90 days late, debt sent to collections in the past two years, or a bankruptcy, foreclosure, repossession, or tax lien in the past five years.

Credit score matters much more when it comes to private student loans. In fact, generally, you will need to have a credit score of at least 620 to be approved for a loan with most private lenders -- and a credit score above 720 will be needed to give you the widest choice of loans at competitive rates.

If you do not have a credit score that enables you to qualify for a private loan, you may be able to apply for one with a cosigner who has a stronger credit history. You can visit Credible to learn more about private student loans and to compare rates and terms to see what loans you may be eligible for.

Can you still get a student loan with bad credit?

Some student loans are available to borrowers regardless of credit score.

Eligibility for Direct Subsidized and Direct Unsubsidized Loans does not depend on your credit history. While there may be some changes to student loans under the Biden administration, this has always been the rule and will not change, as these loans are issued by the Department of Education to make it easier for anyone to fund an education.

Private student loans, on the other hand, can be more difficult to obtain. In fact, while interest rates are near record lows on these loans right now, many lenders are being more careful than ever about who they loan money to as a result of economic uncertainty caused by COVID-19.

If you do not have a credit score of at least 620, and ideally closer to 720 or higher, you may face difficulty getting approved for a student loan with bad credit. However, a cosigner could help you to apply for a loan and maximize your chances of approval. Credible allows you to compare student loan variable interest rates and fixed interest rates to see what rates you could qualify for — all without affecting your credit score.

How can I get a student loan if I have bad credit and no cosigner? 

If you have bad credit and you do not have a cosigner, you will still be eligible to obtain federal student loans from the Department of Education. This includes Direct Subsidized and Direct Unsubsidized Loans. You will need to complete the Free Application for Federal Student Aid in order to be eligible for this educational financing.

If you have exhausted your federal student loan limits, it may be more challenging to get private student loans if your own credit is poor and you don't have someone to cosign for you. There are some lenders that look beyond credit history and consider factors such as future earning potential.

You can explore all of your loan options by visiting Credible — but be aware you may pay a higher interest rate if your credit isn't very good. You can use a student loan calculator to see what your monthly payments might be.

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Finding the best student loans for bad credit

While there are opportunities to find student loans for bad credit borrowers, improving your credit score can open up the door to borrowing with your choice of lenders and may enable you to get more affordable rates on private student loans.

You can boost your score by doing the following:

  • Paying bills on time (consider setting up automatic payments)
  • Making sure your credit report is free of errors
  • Keeping your credit card balances low

The sooner you develop a positive payment history, the easier it will be to borrow not just for school but for anything you need to get your career started after graduation.

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