Establishing good credit takes planning, effort and time. A good credit score can open a world of opportunity with quality housing, better insurance rates and more loan options. Bad credit often limits these opportunities. Luckily, credit history has little impact on getting a student loan.
Let’s take a look at the many options available for student loans.
Federal Student Loans
You can apply for federal student loans without worrying about credit standings. While the Free Application for Federal Student Aid form (FAFSA ®) does ask for financial information, you won’t be questioned about your credit score.
Submitting the FAFSA won’t affect your credit score the same way applying for other loans may. Federal student loans come directly from the U.S. Department of Education. These loans consist of direct subsidized loans, direct unsubsidized loans, direct PLUS loans and direct consolidated loans.
Direct subsidized loans are for two and four-year students with financial need. The government pays the interest on these loans at specific times during the life of the loan.
Direct unsubsidized loans are available for two-year, four-year, graduate and professional students. Anyone is eligible for these loans, regardless of income level. Borrowers must pay interest throughout all periods of the loans.
Direct PLUS loans require a credit check, but a bad credit history won’t disqualify you. Instead, there may be some additional requirements to receive the loan. These loans are for graduate students, professional students and the parents of undergraduate students.
Direct consolidated loans are often borrowed after graduation to combine all previous student loans into a single payment. These can make paying loans much more convenient.
Private Student Loans
Typically issued by banks and other financial institutions, credit scores do factor in with private student loans. The good news is these lenders may fund people with credit histories that aren’t ideal, especially if they have a co-signer. The better your credit history looks, the lower your interest rates.
If you aren’t able to make payments on a private student loan, it could hurt your credit history. Seeking student debt relief can help prevent this. It’s a good idea to shop around before getting a private student loan because interest rates and payment terms will vary from lender to lender.
Student Loans at a Glance
You can get a student loan with bad credit. Federal student loans are the best bet with several options available.
Private student loans with bad credit or no credit are also possible. However, they’re likely to be more expensive. The cost of these loans may be lower if you have someone with a strong credit history to co-sign the loan.
