If you need a student loan, but you have bad credit or no credit history, federal student loans are your best option. They don’t require a credit history to borrow and offer flexible repayment options.
But federal loans do have borrowing limits. To fill a gap in college costs, you may need to take out a private loan from a bank, credit union or online lender. Most private lenders require borrowers to have a credit score of 690 or above. If you don’t have credit or your credit is bad (a score between 300 and 629), you have two options for private loans:
- A private loan from one of the few lenders that don’t have credit or co-signer requirements, though you’ll pay higher interest rates.
- A private loan with a co-signer who has good credit.
- Start with federal student loans. Fill out the Free Application for Federal Student Aid, known as the FAFSA to apply for federal student loans as well as qualify for free aid such as grants, scholarships and work-study. They offer lower interest rates and come with income-driven repayment plans and forgiveness programs.
- Find a co-signer with good credit. To borrow private loans with a co-signer and get the most competitive interest rates, they’ll need to have a good credit score and steady income. If you opt for a co-signer, they’ll be responsible for your debt if you can’t repay it.
>>Compare private student loans you can get with a co-signer.
- If you can’t find a co-signer, consider loans you can get independently. Some lenders offer private student loans without factoring in credit scores. Future income potential is usually considered instead. The higher your earning potential, the more likely you are to get competitive rates.
- Compare loan features. When shopping for a private loan, compare offers to get the lowest interest rate you qualify for. Note whether the lender will postpone payments in case you have difficulty affording them, and for how long. That’s important. Find out if there are origination, prepayment or late fees, and how easily you can reach the lender by phone, email or live chat if you encounter a billing or customer service issue.
- Opt for a fixed interest rate. Given the choice, a fixed interest rate is a safer bet than a variable interest rate. It won’t increase over time.
- Keep an eye on the bottom line. Use a student loan calculator to see what kind of payment you’ll face after borrowing for multiple years.
- Consider refinancing in the future. Once you’re out of school and have built a credit profile, you may be able to refinance private loans to a lower interest rate. You’ll generally need solid income, a credit score of 690 or higher and a history of on-time debt payments.
Top student loans for bad credit 2018
Best student loans for bad credit
Federal direct student loan
- Eligibility: Any U.S. citizen or eligible noncitizen who fills out the FAFSA can get a federal direct student loan. Subsidized loans are available only to students who demonstrate financial need.
- Loan term: 10 to 25 years.
- Loan amount: Up to $31,000 total throughout college for undergrads who receive financial support from their parents; up to $57,500 total for undergraduates who don’t.
- Repayment options: Four income-driven repayment plans; payment postponement for up to three years if you’re unemployed; no interest accrues for subsidized loans while in school and during periods of deferment.
- Grace period: 6 months.
How it stands out: Federal direct loans offer generous repayment flexibility and among the lowest fixed-interest rates you’ll find.
» MORE: Learn more about Federal Student Aid with NerdWallet’s FAFSA Guide
Options for private student loans for bad credit
Ascent Independent student loan
- Eligibility: Available to juniors, seniors or graduate students without income, credit history or a co-signer. You must be a U.S. citizen or permanent resident to qualify. You also must meet all financial requirements: Borrowers must not have defaulted on any private or government student loan; may have no delinquencies of 60 or more days during the previous two years; may have no reported bankruptcy within the past 5 years; no charge-offs or collections accounts over $100; no unsatisfied repossessions, judgments, tax liens, foreclosures or garnishments by creditors; and may have to meet minimum credit requirements, as determined by Ascent.
- Loan term: 10 or 15 years (15-year term available for variable-rate loans only)
- Loan amount: $2,000 to $200,000 total throughout school.
- Repayment options: Deferred (start making full payments six months after leaving school)
- Grace period: 6 months
How it stands out: Instead of focusing only on credit, Ascent also evaluates your application based on factors like earning potential, major and attendance in school. You’ll receive up to 24 months of forbearance if you have trouble making payments, during which interest will continue to accrue.
MPOWER student loan
- Eligibility: Available to juniors, seniors or graduate students, particularly international students or those with Deferred Action for Childhood Arrivals, or DACA, status.
- Loan term: 10 years.
- Loan amount: $2,001 to $50,000 total.
- Repayment options: Make interest-only payments while in school and during the grace period, then full payments for 10 years.
- Grace period: 6 months.
How it stands out: While MPOWER’s interest rates are relatively high, the lender offers a hard-to-find option: student loans for international students without requirements for a credit score or a co-signer. You’ll be evaluated based on earning potential and positive payment history on your credit report, though not on your score.