College can be expensive, which is why many students turn to student loans. But with your head buried in books, you may not have taken any steps to establish your credit history — a necessity to prove you and pay back borrowed money. But do you need good credit to secure a student loan? And can you still get a student loan with no credit?
What are student loans?
Student loans are loans taken out by college students to help finance their post-high school education. These loans come in a variety of offerings, including federal and private loans. The government administers federal loans, and banks or other private lenders issue other loans. Loans are also both subsidized, which is based on financial need, and unsubsidized — loans that don’t require you show a need.
Subsidized loans typically have lower interest rates, since the federal government pays some of the interest for the borrower. Private student loans are unsubsidized.
We don’t recommend taking out loans simply as a way to build credit — student credit cards are better for that purpose — but if you absolutely need a loan to afford your higher education and you don’t currently have any credit, you’ll need to know about your options.
Hitting the books
Starting your search for a student loan? Here are the steps you should take, even — and especially — if you have no credit.
Apply for federal aid first. Before considering a loan, fill out the Free Application for Federal Student Aid. This will help you determine if you’re eligible for federal financial aid or loans. NerdWallet’s FAFSA Guide can help answer any questions you have while filling out your application.
Consider your options. In general, federal loans are your best bet, especially if you don’t have credit. These loans typically have lower interest rates than private loans. Additionally, some federal student loans don’t require a credit check. As long as applicants meet the eligibility criteria, you can apply with no credit. This is good news for students who are just starting to establish their credit history.
Find a co-signer. If you have no credit, getting approved for a loan that requires a credit check is difficult. If you’re looking at this kind of loan, one option is to add a co-signer, possibly a parent, to the loan. You can use your co-signer’s credit to help qualify, but remember that the co-signer must be willing to be responsible for the loan if you fail to repay it.
Turn the page. Use NerdWallet’s Student Loan Calculator to help you make the best choices about how to finance your college years. You’ll be able to estimate payments and calculate your maximum possible federal borrowing.
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