How to Get Student Loans for Grad School, Even With Bad Credit

 April 23, 2021
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If you don’t have strong credit, you might be worried about getting a loan for graduate school. Fortunately, there are graduate student loans for bad credit, especially if you can apply with an endorser or cosigner.

With the affordable options discussed below, you don’t have to let bad credit — or a lack of credit — stand in the way of earning your advanced degree. Let’s look at…

Where to find graduate student loans for bad credit

As you start looking for bad credit student loans, check out these options first:

  • Federal student loans for graduate students: These carry no- or low-credit requirements, making them some of the most accessible ways to borrow for grad school.
  • Private graduate school loans: You might be able to get grad school loans from private lenders. However, you’ll have to offset your poor credit by applying with a qualified student loan cosigner.

Both federal and private student loans have their pros and cons, but there are times when each can make sense.

Here’s an overview of the features each option can offer graduate students.

Graduate loan type Direct unsubsidized loans for graduate students Grad PLUS loans Private student loans
Credit requirements None No adverse credit history Good credit score in the mid-600s or higher, or a cosigner with good credit
Interest rate 4.3% 5.3% Varies by lender and borrower credit score
Loan fee 1.057% 4.228% Varies by lender
Annual loan limit $20,500 Up to cost of attendance, after other financial aid is applied Up to cost of attendance, though some lenders set their own loan limits
Aggregate loan limit $138,500 (graduate and undergraduate debt) None Varies by lender

Rates are accurate as of April 2, 2021

Remember that you’re not locked in to any one kind of loan — especially with bad credit student loans. You can even borrow a blend of different grad school loans to maximize your benefits and savings.

Federal student loans for grad school: Requirements vary

As a graduate student, you can file the Free Application for Federal Student Aid (FAFSA) to get access to graduate school student aid and loans. After the government processes your FAFSA, your college puts together a graduate school student aid award package that outlines your options to pay for your graduate degree.

This financial aid award package is a great place to start looking for bad credit student loans. In particular, check for two federal student loans currently available to graduate students: Direct unsubsidized loans and grad PLUS loans.

Graduate students don’t need to demonstrate financial need to access either direct unsubsidized loans or grad PLUS loans. You will need to be an eligible student enrolled at least half time in a qualifying graduate program to access federal loans.

Here are the details:

Direct unsubsidized loans: No credit requirements

Direct unsubsidized loans for graduate and professional students carry no credit check or income requirements to qualify. A lack of credit requirements could make these your best option to get affordable loans for grad school when you have poor credit.

As the table above shows, you will face limits on the amount you can borrow with direct unsubsidized loans. If your costs are higher than that, don’t panic. You can borrow up to your limit in direct unsubsidized loans for grad students and cover the remaining costs with grad PLUS or private student loans.

If you’re in a professional medical program, you might have higher annual and aggregate limits on direct unsubsidized loans. Check with your school’s financial aid office to see if you can borrow more.

Grad PLUS loans: No adverse credit history allowed

Unlike direct unsubsidized loans, grad PLUS loan applications include a credit check. To get a grad PLUS loan, you must not have an adverse credit history. Here’s what that means:

  • Must not currently have any credit accounts with balances over $2,085 that are more than 90 days delinquent, in collections or charged off in the past two years.
  • Must not have a bankruptcy discharge, repossession, default determination, foreclosure, charge-off of federal student aid, wage garnishment or tax lien within the past five years.

The non-adverse credit standard is easier to meet than the credit requirements most private lenders set. So even if you were rejected for private student loans, it can still be worth applying for a grad PLUS loan.

What to do if you have an adverse credit history

If you do have an item that would make your credit history adverse, you still have two options:

  • Add an endorser to your grad PLUS loan application. The endorser plays a similar role to a cosigner, agreeing to repay the loan if you do not.
  • Document and submit proof of extenuating circumstances that led to your bad credit.

In these cases, you can try to get your grad PLUS loan approved despite your adverse credit. If approved, you will be required to take an online course on credit.

Private student loans for grad school: Good credit or a cosigner needed

Unlike the nonexistent or low-credit requirements on federal student loans, private lenders usually want to see a high credit score and solid financial background. But if that’s not you, don’t write off private grad school loans. You can still get private student loans for grad school with the help of a cosigner.

To get graduate student loans for bad credit from private lenders, you’ll need to apply with a qualified cosigner. The lender will consider each applicant’s information. Even if you have bad credit, it could be balanced out by your cosigner’s positive credit history and qualifications.

Lenders commonly look for the following in cosigners:

  • Positive payment history: Your cosigner should have a clean credit report with no recent missed payments or delinquencies.
  • A high credit score: A good credit score for private student loans is usually at least in the mid-600s. But the higher, the better. You’ll have a better chance of getting approved and snagging lower rates if your cosigner’s FICO Score is over 700.
  • Low debt-to-income ratio: Lenders prefer cosigners with a debt-to-income ratio of 35% or lower, which indicates that they can afford to take over repayment if necessary.

Before your student loan cosigner signs on the dotted line, make sure they understand that they will be equally responsible for the loan’s repayment.

Whatever your credit score, it doesn’t have to keep you from being able to pay for your advanced degree. With these options to get bad credit student loans, you can get the financing you need to pay your way through grad school.

That frees you up to focus on getting the most return on investment from grad school — and paying off your student debt as fast as possible.

Rebecca Safier contributed to this report.

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