Can you get student loans with no credit? What about with bad credit?
We would all love to be able to get a degree without having to take out student loans, but the sad fact is that 70% of students must take out student loans to help pay for college. Even when you have scholarships or grants that help cover the cost of tuition, you will most likely still have to take out a loan to cover the rest of your school.
But what if you have bad credit?
Many people worry that they may not be able to take out student loans due to their bad credit history, or that they can’t get student loans with no credit history. And because the majority of students are young with limited credit history, you may be starting off with a lower score due to no fault of your own. 15% of your credit score is based on the length of credit history, which young borrower automatically do not have.
Fortunately, your credit score will only affect your ability to take out student loans if you want to take out private student loans.
Student Loans with No Credit or Bad Credit — Go Federal
When you apply for a federal student loan, your credit is not taken into account. In fact, there is no credit check when applying for federal student loans, with the exception of PLUS Student Loans.
Not only do federal student loans not require a credit check, but they often have the lowest interest rates when compared to private student loans. This means you can get student loans with no credit or if you have bad credit.
To apply for a federal student loan, all you need to do is fill out the Free Application for Federal Student Aid, or FAFSA . All you need to do is fill out this form, and your eligibility will not be based on your credit, but rather you and your family’s need for financial aid. As long as you are a US citizen or an eligible noncitizen, who can show financial need.
The amount you can be awarded through federal student loans is based on your families ability to contribute financially. Undergrads who receive financial support from their family are eligible for $31,000 and undergraduates who are considered independents, meaning they do not receive financial support from their families, are eligible for up to $57,500.
Once you take out your loans, you have 10–20 years to pay them back. The great thing about federal student loans is they typically have longer repayment terms, lower interest rates, and additional protections for borrowers. You also typically have a grace period of six months once you leave school. This will give you time to plan how you will begin to repay your loans and get a job.
Private Student Loans With Bad Credit
If you have bad credit or even no credit, getting a private student loan will be a bit more difficult. Going through a private financial institution will require a credit check, as the company will want to be sure that you will be able to pay back the loan that you are taking out.
However, there are creditors out there that do lend to students who have less than perfect credits. Getting student loans with no credit, however, will be even more challenging.
If you have bad credit and want to explore your options with private student loans, you will likely have a much higher interest rate, fewer options, and fewer protections. Because of this, you should always opt for a federal student loan first. Private student loans are a good option if you need additional funding to cover your tuition and your federal loan falls short.
If you are having trouble getting a private loan, having a co-signer can help you get approved and even lower your interest rates.
Whether you turn to a co-signer or end up with a high interest rate, refinancing may be an option you will want to look into once you leave school and have improved your credit score. If you have federal student loans and are on an income-based repayment plan, this may not be the right option for you.
If you have bad credit, and no co-signer, there are a few options for you.
This lender will give student loans to students who are in their junior and senior year of college, or to those who are in a graduate program. These loans are good for students who don’t have any credit history, current income, or a co-signer.
To qualify for an Ascent Independent Student Loan you can’t have defaulted on any previous student loans, can’t be more than 60 days delinquent on another student loan in the past two years, no bankruptcy in the past five years, and you can’t have over $100 in collections.
Ascent gives loan terms of 10–15 years, and loan amounts up to $200,000. Once you finish school, you will have a grace period of six months before you have to begin paying back your student loans.
This lender provides student loans to juniors, seniors and graduate students, particularly to international students or those with DACA status.
MPower provides a loan term of 10 years, and loan amounts up to $50,000. Once you leave school, you will have a grace period of six months before you must begin to repay your student loans.
How Student Loans Affect Your Credit
Taking out student loans with no credit, or when you have bad credit, can help you build a credit history. This can be useful as many first-time student loan borrowers take out a loan without any credit history. A portion of your credit score is calculated on the length of your credit history, and for many students, the loans they take out to attend college is their first piece of credit.
Borrowing money for your student loans will also add variety to your credit history, showing that you are able to take out and make payments on different types of loans. This can help you raise your credit score as you begin to pay back your loan. And, if you take out student loans with no credit history, then you will be able to start building it up.
Student loans are also easier to pay back as often times your lender will be more than willing to work with you, especially if you have federal student loans. You may have the ability to lengthen your loan term and get smaller payments.
Although taking out student loans can have a positive impact on your credit, it can also have a negative impact if you do not pay them back. Missing payments can damage your credit score, and if you don’t work it out with your lender or make your missed payment within 60 days, your wages may be garnished.
Don’t Let Your Credit History Keep You From Your Education
While taking out student loans isn’t the ideal situation for anyone, you can’t let your credit score keep you from going to school. If you have bad credit, or no credit at all, there are plenty of options available to you.
Your best bet for taking out a student loan, whether you have good or bad credit, it to apply for a federal loan. This requires no credit check and is based on the individual student’s need. When you apply through FAFSA, you won’t only apply for federal student loans, but you also apply for other types of student aids, such as grants, which do not need to be paid back.
Once you qualify for a student loan, you can then use that loan to begin to build or improve your credit score so that you will be able to take out other types of loans in the future at lower interest rates.
Originally published at https://www.gradism.com on October 19, 2020.