For many students, applying for student loans to help pay for college is a necessity. Moreover, because federal student loans have borrowing limits that don’t always cover all educational expenses, and many people have to take out private student loans , as well.
According to the Institute for College Access and Success , 62% of college seniors who graduated from public and private nonprofit colleges had student loan debt.
But is credit required for student loans? That may be a concern for many students, especially if they haven’t had the opportunity to build a credit history.
The truth is that some types of student loans do require a credit check. But for most college students, applying for student loans without credit shouldn’t be a problem. And https://guaranteedinstallmentloans.com/payday-loans-mo/ if it is, there are ways to get the financing you need.
Federal Student Loans Are Best for Students With Bad or No Credit
If you’re looking to get a student loan but don’t have a credit history, federal student loans are the way to go.
With federal undergraduate loans, there’s no credit check required at all. This means that everyone who’s eligible to apply based on their financial need will be approved. The same goes for Direct Loans for graduate and professional students.
So if you’re a college student who has no credit history or a limited one, you shouldn’t have a problem qualifying for federal student loans. If your credit history improves, you may even be able to refinance federal student loans later to a lower interest rate. Student loan refinancing can help to streamline the student loan repayment process.
Federal Student Loans for Parents With Bad Credit
It’s important to remember that if you’re applying for a Parent PLUS Loan , however, the Department of Education does run a credit check.
Even then, you don’t need to worry if you don’t have a credit history. The only things they’re looking for are serious negative items on your credit report. Examples include bankruptcy, foreclosure, repossessions, certain past-due debts, and more. Read the Office of Federal Student Aid’s definition of adverse credit to learn more.
If you’re concerned about the credit check, you can look for an endorser who can qualify the loan. You can also appeal a denial with the Department of Education.
Can You Get a Private Student Loan With No Credit?
In some cases, federal student loans may not be available or you may have exhausted your allotment. In either case, you may need to turn to private student loans to bridge the gap between the financial aid you receive and what you owe.
While the federal government won’t turn you away for not having a credit history, private student loan companies might. These private lenders don’t have the same backing as the federal government. For that reason, they use a risk-based pricing model.
In other words, when you apply for a private student loan, the lender will run a credit check. If you have a good credit history, you’re statistically less likely to default on payments than someone with a poor credit rating. As a result, you’ll have a better chance of getting approved and scoring a lower interest rate.
If your credit file is relatively thin or you don’t have a credit history at all, though, the lender doesn’t have enough information to determine whether you’re at risk of default. In this scenario, the lender may deny your application because of the risk of not knowing how you’ve handled credit in the past.
That doesn’t mean your chances of getting a private loan without a credit history are gone completely. Most private lenders allow you to apply with a cosigner, who can boost your odds of getting approved. Some lenders may also consider your application even without a cosigner, however, you’ll likely pay higher interest rates than you would in other circumstances.