Credit card debt is an increasingly common part of life. In fact, the average credit card debt per cardholder in the U.S. is $4,061. With high interest rates and no formal repayment plans, credit card debt can quickly spiral out of control.
Carrying a credit card balance can affect several areas of your life. However, many people overlook how credit card debt can impact your ability to take out student loans to help your child pay for school. If you’re wondering how to get student loans with credit card debt, here’s everything you need to know.
How credit card debt affects your student loan options
Most federal student loans don’t require a credit check, but the government checks your credit when you apply for a Parent PLUS Loan. If you have an adverse credit history, you might not be eligible for a Parent PLUS Loan.
Carrying a credit card balance by itself won’t disqualify you from PLUS Loans. When it comes to credit card debt, the government considers a balance to be an issue if you meet one of the following criteria:
- You have an outstanding balance of $2,085 or more that’s delinquent by 90 days or more.
- Your credit card debt was placed in collection or written off during the past two years.
- You underwent bankruptcy proceedings in the past five years.
If any one of those situations appears on your credit report, you might not be able to get a Parent PLUS Loan.
Unlike federal loans, private loans are issued by banks and financial institutions. Private student loan lenders have stricter criteria than the federal government, so your credit card debt can have a more significant impact on your borrowing options.
When a private lender reviews your application, it decides whether to issue you a loan based on several factors, such as your income and credit history. If you carry a balance on your credit cards or have other forms of debt, that debt can lower your credit score.
The lender also looks at your debt-to-income ratio, or how much of your gross income goes toward debt payments each month, to determine your ability to repay the loans. The worse your debt-to-income ratio, the less likely you are to receive a loan.
Every lender has its own eligibility requirements and credit standards, so you’ll have to apply to each lender individually.
How to get student loans with credit card debt
Although your credit card debt can make getting parent student loans more difficult, it’s possible if you use these four tips.
1. Find an endorser or cosigner
If you can’t qualify for a Parent PLUS Loan or private parent student loan on your own, you might be eligible if you find an endorser or cosigner for the loan.
Endorsers and cosigners, typically friends or relatives with good credit and stable income, act as guarantors. If you fall behind on your loan payments, they’re responsible for making them. Having an endorser or cosigner reduces the lender’s risk, so it’s more likely to approve you for a loan with a guarantor than if you applied on your own.
2. Pay down your debt
Paying down your credit card debt is one of the best ways to improve your credit history and increase your chances of getting a loan. If you’re able to pay off one form of debt, you’ll no longer have that monthly payment hanging over you. That change will help boost your debt-to-income ratio, making you a more attractive candidate to lenders.
If you’re not sure where to start, consider these strategies for debt repayment:
- Launch a side hustle: If your income is too low for you to afford extra payments, consider picking up a side hustle to earn extra money in your spare time. Apply your earnings toward your debt, and you’ll be able to pay it off faster.
- Raid your savings: If you have money in the bank, consider using it to pay down debt. Paying off high-interest credit card debt can give you a higher return than what that money would earn in interest in a savings account.
- Put windfalls toward your debt: Apply every windfall, such as a raise or tax refund, toward your debt.
3. Consolidate your debt
If you’re behind on your payments or struggling to pay down your debt, another option is to consider credit card consolidation. With this approach, you take out a personal loan for the amount of all your credit card debt and use it to pay off your credit card balances. The new loan has a fixed repayment term and set monthly payment.
Consolidating your debt can eliminate any delinquencies on your credit history and make your payments more affordable, increasing your chances of getting a parent student loan.
4. Encourage your child to apply for loans on their own
Despite your best efforts, you might not be able to qualify for federal or private student loans to help your child pay for school. If that’s the case, encourage your child to complete the Free Application for Federal Student Aid (FAFSA) and contact their school’s financial aid office. If you’re unable to take out student loans, your child might qualify for additional federal aid, including Direct Unsubsidized Loans.
Helping your child pay for school
There are options available to you if you want to help your child pay for school when you have credit card debt. If you’re wondering how to get student loans for your child’s education, make sure you consider both federal and private student loans to maximize your chances of getting approved.
You can finance your child’s education by helping them identify grants and scholarships to reduce their college costs. Here are some of the best places to find free money for college.
Need a student loan?Here are our top student loan lenders of 2018!
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2 = CollegeAve Autopay Disclaimer: All rates shown include the auto-pay discount. The 0.25% auto-pay interest rate reduction applies as long as a valid bank account is designated for required monthly payments. Variable rates may increase after consummation.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
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|4.12% – 11.85%*3||Undergraduate and Graduate||Visit SallieMae|
|3.69% – 12.07%2||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|4.07% – 12.19%1||Undergraduate, Graduate, and Parents||Visit Citizens|
|3.83% – 12.11%||Undergraduate and Graduate||Visit Ascent|
|4.63% – 9.71%||Undergraduate and Graduate||Visit LendKey|
|3.62% – 9.79%||Undergraduate, Graduate, and Parents||Visit CommonBond|