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Bad credit doesn’t have to stop you from pursuing a college education. The federal government and private lenders offer student loans for bad credit to help you cover college expenses.
Always consider federal student loans first, but remember, these loans have limits and may not cover all of your expenses. After those, you can look into private student loans that don’t require a cosigner or apply for one with a creditworthy cosigner.
On this page:
- Compare Bad Credit Student Loans
- Federal Student Loan Options
- Private Student Loan Options
- Alternatives to Consider
- Steps to Getting a Bad Credit Student Loans
Compare Bad Credit Student Loans
The following table gives an overview of student loan options for borrowers with bad credit. Always use federal student loans (marked with an asterisk) first before turning to private loans.
|APR||Loan Terms||Loan Amounts|
|Direct Unsubsidized*||4.53% or 6.08%**||Varies||Varies|
|Ascent||3.63% – 12.93%||5, 10, or 15 years||$2,000 – $200,00|
|Funding U||7.99% – 13.49%||10 years||Not disclosed|
|MPower||Not disclosed||Up to 10 years||$2,001 – $50,000|
*This is a federal student loan
**4.53% for undergraduate and 6.08% for graduate or professional
Federal Student Loans for Bad Credit
Most federal student loans don’t take your credit score into account when determining eligibility. Instead, the government will simply see if you meet some basic requirements such as being a U.S. citizen or eligible non-citizen and being enrolled in an eligible school.
To determine eligibility, students need to complete the Free Application for Federal Student Aid (FAFSA).
Below, we’ll go over the federal student loans available to students with bad credit.
Direct Subsidized Loans
|Loan Type||Fixed Rates (APR)|
|Direct Subsidized Loan||4.53%|
Direct Subsidized Loans are provided by the U.S. Department of Education and are only offered to undergraduate students. These are available to undergraduate students who demonstrate financial need.
For subsidized loans, the annual maximum borrowing limit ranges depending on grade level.
Direct Unsubsidized Loans
|Loan Type||Fixed Rates (APR)|
|Graduate or Professional||6.08%|
The Direct Unsubsidized Loan is similar to the Direct Subsidized loan except that with the unsubsidized loan, the government does not pay the interest at any point and graduate students are eligible.
While interest rates for undergraduates remain the same, students are eligible to borrow more in unsubsidized loans. Limits range depending on grade level and dependency status.
Direct PLUS Loans
|Loan Type||Fixed Rates (APR)|
PLUS Loans are more similar to private loans than other types of federal loans. These loans do require a credit check and they have higher interest rates and fees than other federal loans.
Even though there is a credit check for the Direct PLUS Loan, requirements can be less stringent than private loans. The government wants to make sure the applicant has no adverse credit history such as a bankruptcy or delinquencies over 90 days.
Private Student Loans for Bad Credit
After maxing out federal student loans and other financial aid, private student loans can be used to bridge the gap.
Private student loans do require a credit check and most lenders require applicants to have a credit score of 690+ or a creditworthy cosigner.
If you don’t have good credit or a creditworthy cosigner, you can consider student loans without a cosigner from companies such as Ascent, Funding U, and MPower.
4.23% – 14.16%
5, 10, or 15 years
$2,000 – $200,000
Ascent offers loans for both undergraduate and graduate students. These loans are provided to both students with cosigners and those without.
Eligibility for Ascent student loans is based not just on creditworthiness but also on individual factors such as what the applicant is studying, which can indicate future earning potential.
The following are some details of Ascent student loans:
- Variable APRs range from 5.49% to 12.77%
- Fixed APRs range from 7.00% to 13.74%
- There are no application fees or origination fees
- Ascent offers a 1% cash-back graduation reward
>> Full Review: Ascent Student Loans Review
7.99% – 14.49%
Funding U is another company that specializes in providing education loans for bad credit or no credit.
Funding U bases loan decisions on how an applicant is progressing in school and their earning potential. It takes only two minutes to prequalify online at the Funding U website.
The following are some of the loan terms and specifics of student loans from Funding U:
- With AutoPay, the APR is 11.49%
- Loans close in around two to three days
- Students have to be pursuing a bachelor’s degree at a Title IV-eligible four-year college, and for-profit schools aren’t eligible
>> Full Review: Funding University Student Loans Review
Up to 10 years
$2,001 – $50,000
MPower is a financial institution providing loans for international students, DACA students, and also domestic students. Students can apply for a loan from MPower without having collateral, a credit score, or cosigners.
Details of MPower loans include the following:
- MPower offers loans to more than 190 nationalities including the United States
- Fixed interest rate loans range from $2,001 to $50,000
- MPower works with more than 200 schools
>> Full Review: MPower Student Loans Review
Alternatives to Consider
If you don’t have a good credit score or a creditworthy cosigner and are not interested in any of the above options, you could consider some of the following:
- Scholarships. Applying for scholarships is always a good idea before taking out any student loans—regardless of your credit score. These don’t have to be repaid and are issued based on achievements (such as academic or athletic), financial need, or based on your personal background (such as ethnicity, interest, or location).
- Grants. Like scholarships, grants do not need to be repaid. They are, however, typically based on financial need. The federal government (ex: Pell Grants), state governments, colleges, non-profits, and other private organizations usually offer grants.
- Work-Study Programs. These programs give students part-time jobs while in college to help pay for their education. Your work schedule will be determined based on your class schedule, academic progress, and the amount of the work-study award.
- Personal Loans for Students. If you are really in a pinch and need money to cover the cost of attendance, you may be able to get a personal loan designed for students. These should be used as a last resort, however, as they will likely have very high interest rates, especially if you don’t have a good credit score.
Recap: Steps to Shopping for Bad Credit Student Loans
When shopping for federal or private student loans for bad credit, there are specific steps you should take to make sure you are choosing the best option.
- Make sure you’ve exhausted scholarship and grant options. You should always max out your scholarship and grant options before moving onto student loans since these don’t need to be repaid.
- Check if you are eligible for a work-study program. After filling out the FAFSA, you may see that you are eligible for a work-study program. If you think you’ll have time to work some while taking classes, these can be a good way to pay for college without having to take on loans.
- Use federal student loans. Federal student loans typically have lower interest rates and more favorable repayment terms (such as income-driven repayment plans and student loan forgiveness options). Fill out the FAFSA to see what federal loans you are eligible for.
- Look for a creditworthy cosigner. If you can find a cosigner with a good credit score to add to your loan application, they may help you qualify for private student loans. Just know that there are risks for cosigners, so make sure they know what cosigning involves and the financial dangers of cosigning.
- Look into student loans for those without a cosigner. There are a few lenders that offer student loans without a cosigner. These usually have higher rates than you would get with a typical federal or private student loan, but they may be necessary to help you cover college costs.
Author: Ashley Sutphin
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