Best Student Loans for Bad Credit

Best Student Loans for Bad Credit

The best student loans for bad credit enable people with poor or no credit a chance to pay for college and grad school. Alternatively, the loans may provide a lifeline to parents who have bad credit but still need to help their children attend and pay for college.

Typically, when you apply for financial aid, you have two types of loans available to you:  federal and private. The federal government funds federal loans. Private loans are nonfederal and awarded by a lender–usually a bank, credit union, or another financial institution.

The good news is that the most common federal loans do not require a credit check. Also, there are plenty of options for private student loans for bad credit, but you may have to pay a higher interest rate than what you’d have to pay with a better credit score.

Federal Student Loans for Bad Credit 

Your first step should be to apply for federal student loans. Then if that doesn’t work out, apply for private student loans. You want to look at federal loans first because they have some distinct advantages for you, the borrower.

Generally, federal loans have lower interest rates, more flexible payment options, and safeguards.

Another critical advantage of federal loans is that (in most cases) they don’t require a credit check. The relaxed credit history standards and requirements make federal loans among the best student loans for bad credit.

While you don’t have to have pristine credit to qualify for federal loans, you must meet specific qualifications to receive the disbursement.

For instance, to qualify, you must:

  • be a U.S. citizen or a qualifying noncitizen
  • enroll in a federally qualifying college, university, or program
  • have a valid Social Security Number
  • maintain satisfactory academic progress
  • submit your Free Application for Federal Student Aid (FAFSA)
  • show you are qualified to go to college or a program by having a diploma, GED, or something similar

If you meet these qualifications, you are potentially eligible for direct unsubsidized loans, direct subsidized loans, and PLUS loans. Neither federal unsubsidized nor subsidized require a credit check; PLUS Loans require you not to have an adverse credit history.

Direct Unsubsidized Loans

Direct unsubsidized loans are made to undergraduate, graduate, or professional students without regard to financial need. Your school decides the amount you can borrow based on your tuition, other fees, and other sources.

Unlike subsidized loans, you must pay the interest on Direct Unsubsidized loans during the life of the loan.

Interest rates for loans disbursed on or after July 1, 2021, and before July 1, 2022:

  • Undergraduate: 3.73%
  • Graduate and professional: 5.28%

Additionally, there is a loan fee of up to 1.059%.

Federal borrowing limits control the amount of money you receive from unsubsidized loans. Suppose you’re a dependent student whose parents did not qualify for a PLUS Loan. In that case, you may be eligible to receive additional funds.

The limits are as follow:

  • Undergrad Year 1: $5,500 dependent; $9,500 independent
  • Undergrad Year 2: $6,500 dependent; $10,500 independent
  • Undergrad Year 3+: $7,500 dependent; $12,500 independent

For unsubsidized loans, graduate and professional students are classified as “independent” and have a limit of $20,500.

The total, or aggregate limits, are as follows:

  • Undergraduate: $31,000 dependent; $57,500 independent
  • Graduate and professional: $138,500 (total limit includes undergrad loans as well)

Remember that you do not have to take all the money offered. Before you decide about incurring this debt, make sure that you can manage your loans by creating a sound financial plan.

Direct Subsidized Loans

Direct subsidized loans assist in covering the costs of college or career school only for undergraduate students demonstrating financial need. Your school determines your loan amount, and it cannot be more than your financial need.

The loan is attractive because the U.S. Department of Education pays your interest under certain conditions. Those conditions include:

  • while you’re enrolled in school at least half-time
  • a grace period of six months after your leave school
  • postponement, or deferment of loan payments

If you choose to forego paying interest, you should know that the interest still accumulates and is added to your loan amount.

Interest rates for loans disbursed on or after July 1, 2021, and before July 1, 2022:

  • Undergraduate: 3.73%

There is also a loan fee of up to 1.059%.

Like unsubsidized loans, federal borrowing limits control your loan amount for subsidized loans regardless of whether you’re a dependent or independent student.

The limits are as follows:

  • Undergrad Year 1: $3,500
  • Undergrad Year 2: $4,500
  • Undergrad Year 3+: $5,500

For unsubsidized loans, graduate and professional students are classified as “independent” and have a limit of $20,500.

The total, or aggregate limits, are as follows:

  • Undergraduate: $23,000
  • Graduate and professional: $65,500

Direct PLUS Loans

In general, parents and graduate or professional students are eligible to apply for Direct PLUS loans. PLUS Loans require a credit check, but the requirement is that you don’t have an adverse credit history.

The Office of Federal Student Aid defines adverse credit history as one or more of the following:

  • Within the last two years, you’ve had accounts balances exceeding $2,085 that are 90 or more days delinquent or in collections.
  • Within the last five years, you’ve had a
    • bankruptcy
    • charge off of federal student aid debt
    • default
    • foreclosure
    • repossession
    • tax lien
    • wage garnishment

The maximum PLUS amount you receive is the cost of attendance as determined by the institution minus any other financial aid. Even if you have an adverse credit history, you may still qualify for a PLUS Loan if you meet some additional requirements.

Private Student Loans for Bad Credit

It might be the case that you use the federal government to help you pay for college, but you may need more money. To help pay for the balance of your education, you need to find the best student loans for bad credit.

That might be tough because, generally, private lenders have more requirements, including but not limited to:

  • favorable credit score
  • income
  • reasonable debt-to-income ratio
  • history of repayment

Getting the best student loans with bad credit might be a challenge, but what you can do to help yourself is to sign with a cosigner who has good credit, like your parents. Even if you don’t have someone who can cosign with you, there are several options.

Your credit score determines whether you get approved for a loan. The minimum credit score varies by lender, but most companies require a credit score of about 650 and above. The exception is Ascent, which sets the minimum credit score at 540.

If your score is… You might…
649 and lower need to find companies that specialize in student loans for bad credit; consider applying with a cosigner
650 to 690 qualify on your own, but with higher interest rates
690 to 720 get approved with no issues and have okay interest rates
720 and up receive the lowest fixed and variable interest rates lenders offer

Please look at our list of lenders that provide the best student loans for bad credit.

Sofi

Ideal for: Student loans for bad credit when you can secure a creditworthy cosigner

Quick Facts: 

All rates include the autopay discount of 0.25%.

  • Fixed rates: 3.47%-11.16% APR
  • Variable rates: 1.36%-11.79% APR
  • Loan minimum of $5,000
  • No fees
  • Multiple ways to repay
  • Career and unemployment services

Repayment options with Sofi:

  • Deferred: no payments while in school or six months after you leave school
  • Interest-only: pay only the interest while you are in school
  • Partial: $25 fixed monthly payment while in school
  • Immediate: start paying principal and interest right away

Term options: 5, 7, 10, or 15 years

Ascent

Ideal for: Student loans for bad credit, no cosigner needed

Quick Facts: 

All rates include the autopay discount of 0.25%.

  • Cosigned
    • Fixed rates: 4.36%-12.33% APR
    • Variable rates: 1.47%-9.05% APR
  • Non-cosigned
    • Fixed rates: 6.96%-14.08% APR
    • Variable rates: 4.05%-10.80% APR
  • Loan: $2,001-$200,000 aggregate

Eligibility:

  • Cosigned
    • Enrolled at least half-time
    • U.S. Citizen; cosigner must be a U.S. citizen or permanent resident
    • International students or DACA need a U.S. citizen cosigner or permanent resident
  • Non-cosigned
    • Enrolled at least half-time
    • U.S. citizen, permanent resident, or DACA student
    • Two years credit history, meet credit and income requirements

Repayment options:

  • Deferred payments begin nine months after you leave school
  • In-school interest-only payments
  • $25 minimum payment

Terms: 5, 7, 10, 12, or 15 years

Ascent has a non-cosigned “Outcomes-Based Loan,” which has the following details:

Eligibility:

  • Enrolled full-time or graduating within nine months
  • 2.9 GPA or higher and is junior or senior
  • U.S. citizen or permanent resident

The loan amount ranges from $2,001 to $200,000 aggregate and is paid in 10 or 15 years. You must begin payments nine months after you leave school.

College Ave

Ideal for: Student loans for bad credit, but needs flexibility and a cosigner (preferably a parent)

Quick Facts: 

All rates include the autopay discount of 0.25%.

  • Undergraduate Student Loans
    • Variable: 0.94%-12.99% APR
    • Fixed: 3.24%-12.99% APR
  • Graduate Student Loans
    • Variable: 1.99%-10.97% APR
    • Fixed: 4.49%-11.98% APR
  • Parent Loans:
    • Variable: 1.04%-11.98% APR
    • Fixed: 3.34%-12.99% APR
  • Loan amounts: $1,000 up to 100% of the school cost of attendance

Eligibility:

  • U.S. citizen or permanent resident enrolled at an accredited institution
  • International with a Social Security Number and a qualified cosigner

Repayment options with College Ave:

  • Full principal & interest payment: start paying principal and interest right away
  • Interest-only: pay only the interest while you are in school
  • Flat: $25 fixed monthly payment while in school to reduce interest
  • Deferred: no payments while in school

Term options: 5, 8, 10, or 15 years

Earnest

Ideal for: Student loans for bad credit, but have strong savings history or career path.

Quick Facts: 

All rates include the autopay discount of 0.25%.

  • Fixed rates: starting at 2.99%
  • Variable rates: starting at 0.94%
  • Loans: $1,000 up to 100% of the school cost of attendance
  • Min. credit score of 650
  • You or cosigner has a minimum income of $35,000 per year

Eligibility

  • U.S. citizen (except for NV)
  • State’s age of majority
  • Permanent resident

Repayment options for Earnest:

  • Deferred: 9 month grace period after leaving school, or if you are in the military
  • Fixed
  • Interest-only
  • Full

You can skip one payment per year.

Term options: 5, 10 , 15, or 20 years

FAQs

Can I Get Private Student Loans with Bad Credit?

Typically, you will not be able to get a private student loan with bad credit. Still, you may be able to secure a loan with a creditworthy cosigner.

How Do I Get a Cosigner?

You or your parents might struggle to secure a private loan and need an outside cosigner. Work your connections to ensure a cosigner.

You might consider friends who are adept at handling their finances and have a solid income. Another option is your extended family: aunts, uncles, cousins, or anyone willing to help you achieve your education goals. Finally, you might seek a personal or professional mentor with whom you have a solid relationship.

What if I Don’t Get Approved for a Private Student Loan?

Your first step should always be to try federal loans first.

You can get a federal student loan with no bad or no credit. Remember, most federal loans don’t even require a credit check.

Even the PLUS loan for grad students and parents only considers whether you have adverse credit. You don’t have to have pristine credit to get these loans. Even if you have bad credit, you can still get federal loans under most circumstances if you have someone to endorse you.

Another option that might interest you is an income-share agreement (ISA). ISAs aren’t for everyone, but they might work for you if you are willing to be flexible and creative. An ISA is not a student loan; instead, they cover the cost of your education in exchange for a portion of your future income for a predetermined set of time.