Student Loans for Bad Credit

The federal government and several private lenders give loans to students with bad credit. That’s because having bad credit doesn’t always mean poor financial skills. Most students aren’t old enough to have a lengthy credit history.

Best bad-credit student loans

The following table gives an overview of student loan options for borrowers with bad credit.

Loan or lender	Rates (APR)	Min. credit score
Federal Subsidized	5.50%	None
Federal Unsubsidized	5.50% – 7.05%	None
Federal PLUS	8.05%	No adverse credit history
Funding U	7.49% – 12.99%	None
Ascent	4.09% – 16.08%	Varies by loan type
MPOWER	13.98% – 17.08%	None
Edly	Income-based	None

If you’re looking for private student loans, click here to jump down.

Federal student loans for bad credit

Most federal student loans don’t consider your credit score when determining eligibility. Instead, the government will verify that you meet the basic requirements, e.g., being a U.S. citizen or eligible noncitizen enrolled in an accredited school.

To determine eligibility, students must complete the Free Application for Federal Student Aid (FAFSA) by the deadline. This form will determine whether you qualify for federal student loans and other financial aid such as grants and work-study.

Here are the federal student loans available to students with bad credit.

Direct Subsidized Loans

The U.S. Department of Education provides Direct Subsidized Loans to undergraduates with financial need. 

Direct Subsidized Loans are especially helpful to students because the federal government pays your interest while you’re enrolled in school and during your six-month grace period. You can make payments on your loans while you’re in school, but it’s optional. 

You apply for Direct Subsidized Loans by completing the FAFSA. However, there is no credit check, and today, the fixed rate APR is 5.50%. You can borrow up to $23,000 total, and your repayment term will typically be between 10 and 25 years.

The government pays the interest on Direct Subsidized Loans during enrollment, the grace period, and all periods of deferment. The annual maximum borrowing limit for Direct Subsidized Loans depends on the grade level.

Direct Unsubsidized Loans

The Direct Unsubsidized Loan is similar to the Direct Subsidized Loan, except interest accrues while enrolled in school and during your six-month grace period. 

There is no credit check for unsubsidized loans, and payments are optional during school. The interest rate for Direct Unsubsidized Loans is 5.50% for undergraduates and 7.05% for graduate students.

Although Direct Unsubsidized Loans don’t come with as many perks as unsubsidized loans, you can borrow more money with an unsubsidized loan. 

For example, graduate students can borrow $20,500 annually in federal unsubsidized loans. The maximum amount of federal student loans that independent undergraduate students can borrow for their entire education is $57,500, but only $23,000 can be subsidized.

Direct PLUS Loans

Direct PLUS Loans are federal student loans that require a credit check and have higher interest rates than other federal loans. Parent PLUS loans are for parents of enrolled students, and Grad PLUS loans are for students in graduate school.

PLUS Loans have a fixed APR of 8.05% and repayment terms between 10 and 25 years. You can borrow up to 100% of the cost of attendance minus other financial aid, and payments are optional during enrollment.

Like other federal loans, Direct Plus Loans offer a grace period of six months. 

Best private student loans for bad credit

Federal loans have some of the most flexible repayment options and typically have lower interest rates than private loans. However, if you need additional funding or aren’t eligible for federal loans, here the best private student loan lenders for bad credit.

Funding U

Best for Undergraduates

4.7 _/5

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Why we picked it

Funding U is an online private student loan lender specializing in no-cosigner student loans for undergraduate students. The company’s loans are designed for students of all credit and income levels. You can get preapproved with a soft credit check.

Funding U offers fixed interest rates between 7.49% to 12.99% APR, and once you’re approved, you’ll get a dedicated loan officer. Your eligibility for the loan is based on academic performance, not your FICO score.

To qualify, you must be a U.S. citizen, permanent resident, or have DACA status. You must also be 18 or older and enrolled at least half-time in a bachelor’s degree program at a four-year not-for-profit college. You can borrow up to $20,000, and you have several repayment options while in school, including interest-only payments or $20 minimum monthly payments.

• Eligibility is based on academic performance, not your FICO score
• Every approved borrower is assigned a dedicated loan officer for support
• Check your rate without affecting your credit

Loan Details

Rates (APR)	5.59% – 16.99%
Loan amounts	$3,001 – $20,000
Repayment terms	5 or 10 years
Repayment plans	Interest-only or $20 fixed
Enrollment	Full-time
States	38 states, excluding AK, ID, KY, ME, MS, MT, NV, NH, ND, RI, SD, and WY
Credit score	None
Annual income	None

Ascent

Best for Deferred Payments

4.4 _/5

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Why we picked it

Ascent is a private student loan company that offers student loans for undergraduate and graduate students, including DACA and international students. One interesting perk Ascent offers is a 1% cash-back reward upon graduation.

You can check your rate without hurting your credit and choose between fixed and variable rates. Rates are between 8.85% to 15.20% for loans without a cosigner. While in school, you can make interest-only payments, $25 payments, or defer your payments.

Remember that the non-cosigned outcomes-based loan is only available to juniors and seniors who meet their credit criteria.

• Student loans based on school performance for juniors and seniors
• Option to defer payments until after your leave school
• Get 1% cash back for graduating
• Check your rate without affecting your credit score

Loan Details

Rates (APR)	5.59% – 16.99%
Loan amounts	$2,001 – $200,000
Repayment terms	5, 7, 10, 12, or 15 years
Repayment plans	Interest-only, $25 flat, or deferred
Enrollment	At least half-time
States	All 50 states
Credit score	Varies by loan type
Annual income	Varies by loan type

MPOWER

Best for International Students

4.6 _/5

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Why we picked it

MPOWER is a private student loan company that offers fixed-rate student loans to international students. These loans do not require borrowers to have a credit history, but they do conduct a credit review where they look at public record information to see if students have had late payments or other delinquencies.

MPOWER offers financial support to students attending over 400+ colleges in North America. You can apply for loans for a variety of programs, including bachelor’s degrees, master’s degrees, law school, medical school, business school, certain boot camps, and more.

Interest rates start at 13.98% APR, but you can get a 0.25% discount if you enroll in automatic payments. You can borrow up to $100,000, but you must make interest-only payments while in school.

• Fixed-rate loans for international students
• No credit history required, but can’t have late payments or delinquencies
• Interest-only payments required while in school

Loan Details

Rates (APR)	5.59%
Loan amounts	$2,001 – $100,000
Repayment terms	10 years
Repayment plans	Interest-only
Enrollment	At least half-time
States	All 50 states, Puerto Rico
Credit score	None
Annual income	Not disclosed

Edly

Best for Income-Based Repayment

3.9 _/5

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Why we picked it

Edly offers private student loans for juniors and seniors, graduates, and career-based education that also offers a unique repayment strategy. Your monthly payments are based on your income, and you don’t start repaying your loans until your annual gross salary is $30,000 or more.

You do have to meet specific academic requirements to get approved for an Edly loan. They do not approve all majors, and you must be a U.S. citizen enrolled at a qualifying institution.

With Edly, you can borrow up to $15,000 per academic year, but the maximum you can borrow overall is $25,000.

• Approval is based on a model that predicts career success
• Cosigners are not required
• Checking rates doesn’t affect your credit score

Loan Details

Rates (APR)	Based on your income, but won’t exceed 23%
Loan amounts	$5,000 – $25,000
Repayment terms	60 payments or 2.25x the borrowed amount
Repayment plans	None
Enrollment	Full-time
States	Not disclosed
Credit score	None
Annual income	None

What credit score do I need for bad-credit student loans?

The credit score you need to qualify for a student loan depends on the lender. Some lenders may have different requirements for borrowers who can add a cosigner. Here’s a recap of the credit score requirements from the lenders listed above.

Loan or lender	Min. credit score
Federal Subsidized	None
Federal Unsubsidzed	None
Direct Plus	No adverse credit history
Funding U	None
Ascent	Varies by loan type
MPOWER	None
Edly	None

Can you get student loans for parents with bad credit?

Parents with bad credit can qualify for Parent PLUS Loans, which are available to parents of undergraduate students. The federal government will run a credit check if you apply for a Parent PLUS loan. Parents of graduate or professional students are not eligible for a Parent PLUS loan.

Bad credit won’t limit a parent’s ability to take out a Parent PLUS loan, but an adverse credit history can.

Some private lenders offer loans to parents of students, but most require a good credit score to be eligible. If credit is a concern for a parent, the best option may be to let the child borrow through one of the options listed above, where they can prequalify without a hard credit check and then compare offers.

Is there a credit check for bad-credit student loans?

Yes, all lenders will check your credit if you’re applying for a bad-credit student loan. You must supply your full legal name and Social Security number. Then, the lender will notify you whether you’re eligible for a loan.

Checking your credit doesn’t always mean the lender will use it to determine eligibility. Check the lender’s language to see what role the credit check may play.

Ask the expert

Erin Kinkade

CFP®

For students with bad credit due to no credit history, I suggest obtaining a secured credit card, making on-time monthly payments, and paying off the credit card each month. This will help increase your credit score, eventually allowing you to refinance your bad-credit student loans.  

How to apply for bad-credit student loans

When shopping for federal or private student loans for bad credit, take the following steps to make sure you choose the best option.

1. Exhaust all your scholarship and grant options. Apply for scholarships and grants before applying for a student loan because you don’t need to repay grants and scholarships.
2. Check whether you are eligible for a work-study program. Work-study is a program where you get an on-campus job as part of your financial aid package. To land a work-study gig, complete the FAFSA as soon as possible because these positions are limited.
3. Use federal student loans. Federal student loans often have lower interest rates and better repayment terms, including income-driven repayment plans and student loan forgiveness options. Complete the FAFSA to see what federal loans you are eligible for.
4. Look for a creditworthy cosigner. A cosigner with a good credit score may help you qualify for private student loans with lower interest rates. The cosigner should understand the risks for cosigners before finalizing the loan application.
5. Look into student loans for those without a cosigner. A few lenders offer student loans without a cosigner. These may have higher rates than federal loans or other private loans but could be necessary to help you cover college costs.

Alternatives to student loans for people with bad credit 

You might be eligible for another student loan if you’re denied a student loan from one lender. See whether you are eligible with other lenders.

If you can’t find a student loan you’re eligible for, consider these other financing options.

Apply with a cosigner

A cosigner with good credit can boost your approval chances for another student loan.

When someone agrees to cosign a loan, they vouch for your creditworthiness. The loan paperwork legally ties the cosigner to the loan. So if you can’t keep up with the payments, the lender can require your cosigner to pay.

Serving as a cosigner is a significant financial responsibility, but many have family members or friends willing to offer a hand. Don’t be afraid to ask for help if you need it.

Personal loans

Personal loans aren’t specifically designed for students. But in most cases, you can use the funds from a personal loan as you see fit.

As a student, you might spend the funds on tuition or living expenses to keep yourself afloat. But make sure to read the fine print to confirm any spending restrictions.

Personal loans often have higher interest rates than personal loans. But depending on your situation, the added costs present an opportunity to stay in school.

Just know that personal loan lenders may have stricter eligibility requirements than student loan lenders, so your chances of being approved may not be any better than a student loan.

Get a strategic part-time job 

Many companies offer part-time workers tuition reimbursement opportunities. From the company’s point of view, it’s an enticing perk that helps talent stick around. As a part-time employee, you get an opportunity to fund your education.

Companies that offer tuition reimbursement to part-time employees include:

• Amazon
• Chipotle
• FedEx
• Home Depot
• Publix
• Starbucks
• Target
• UPS

Depending on the company, you might be eligible for tuition help on day one or need to wait several months.

Each company’s tuition reimbursement program has different rules, but part-time employment with the right company can cover some of your tuition costs.

FAQ 

Can you get student loans for living expenses with bad credit?

Yes, student loans are not just for tuition. You can use them for several school expenses, including books, food, transportation, and other living expenses. 

Fill out the FAFSA form or apply to a private lender indicating the total amount of money you need. Money that doesn’t go towards tuition will get deposited in your account, and you can use that money for your living expenses, regardless of your credit score.

Which lenders offer graduate student loans for bad credit?

The federal government, Edly, MPower, and Ascent are the lenders on this list that offer graduate student loans to those with bad credit.

Should I add a cosigner to my student loan?

If you have bad or no credit, a cosigner can improve your chances of qualifying for a loan. Many private lenders will require a cosigner because most students don’t have a sufficient credit history to qualify for a loan.

If you have a creditworthy cosigner, apply for a loan with one of the lenders from our list of the best student loan companies.

What are the best student loans for bad credit?

Each lender is different, and it’s hard to say which is best for borrowers with bad or no credit. Funding U or Ascent might be your best option if you don’t have a cosigner or a credit history.

Edly’s loan payments depend on your income, so it’s hard to compare how much you’ll pay compared to a traditional lender.

How can I improve my credit for better approval odds?

Improving your credit will make it easier the next time you borrow money. Start by paying all your bills on time every month. Your on-time payment history counts for 35% of your credit score; even one late payment can result in a 100-point drop. You can also set up automatic payments to avoid missing a payment.

The next most important factor is your credit utilization ratio: your credit balance divided by your total credit card limit. The Consumer Financial Protection Bureau explains that keeping that ratio below 30% shows lenders you’re responsible. 

If it’s above 30%, it could hurt your credit score. If you already have a credit card, avoid opening new accounts or closing old accounts because doing so can lead to a short-term ding in your credit score.

Recap of the best bad-credit student loans

Loan or lender	Rates (APR)	Min. credit score
Federal Subsidized	5.50%	None
Federal Unsubsidized	5.50% – 7.05%	None
Federal PLUS	8.05%	No adverse credit history
Funding U	7.49% – 12.99%	None
Ascent	4.09% – 16.08%	Varies by loan type
MPOWER	13.98% – 17.08%	None
Edly	Income-based	None