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!
|1 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
2 Important Disclosures for Discover.
3 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB) or Turnstile Capital Management, LLC (TCM), which are not affiliated entities. Certain restrictions and limitations may apply. Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. All loan products may not be available in certain jurisdictions. Other terms and conditions apply. Ascent is a federally registered trademark of TCM and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
* 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.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for PNC.
PNC Bank is one of the nation’s largest education loan providers. For over 40 years, PNC has been committed to helping students and their families make possible the adventure of college.
6 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2018 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
7 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
8 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
9 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|3.69% – 10.94%1||Undergraduate, Graduate, and Parents||Visit CollegeAve|
|3.82% – 12.82%3||Undergraduate and Graduate||Visit Ascent|
|4.34% – 12.99%2||Undergraduate and Graduate||Visit Discover|
|4.12% – 10.98%*,4||Undergraduate and Graduate||Visit SallieMae|
|5.03% – 11.23%5||Undergraduate and Graduate||Visit PNC|
|3.88% – 12.88%6||Undergraduate and Graduate||Visit SunTrust|
|4.72% – 9.81%7||Undergraduate and Graduate||Visit LendKey|
|3.72% – 9.68%8||Undergraduate, Graduate, and Parents||Visit CommonBond|
|4.04% – 12.01%9||Undergraduate, Graduate, and Parents||Visit Citizens|