Without good credit, it can be nearly impossible to take out a loan, qualify for a mortgage, or even get approval for an apartment lease.
What’s more, most people don’t start building credit until they’re 18 or older. After all, you can’t take out a loan or credit card until you reach that age. So how can you take out student loans for college when you have no credit history?
Don’t worry. You can still borrow money to pay for school. Here’s how to get student loans to fund your education when you have no credit.
1. Submit the FAFSA for federal student loans
When researching how to get student loans for college, you should first look into Direct Loans from the Department of Education.
These loans tend to have the lowest interest rates on the market: a fixed rate of 4.45% as of July 1, 2017. Plus, they come with borrower protections, including income-driven repayment plans and eligibility for forgiveness programs.
But one of the biggest perks of Direct Loans is that you don’t need credit to qualify. In fact, you can get these student loans without a cosigner and without a credit history.
Instead, all you need to do is submit the Free Application for Federal Student Aid with your and your parents’ financial information. Based on factors such as your family size and income, the DOE will determine your eligibility for need-based and non-need-based aid.
Your college will send you a financial aid package, and it will include a mix of grants, federal student loans, and work-study. You’re not obligated to accept any loans, but they can be a useful tool as you figure out how to pay for college.
Make sure to come up with a repayment plan so you don’t take on too much student loan debt to pay for your degree.
2. Apply for a private student loan with a creditworthy cosigner
As you figure out how to get student loans, you’ll notice that federal student loans tend to have the best rates and terms for student borrowers. However, private student loans can come in handy if you need additional funding.
But unlike federal student loans, you can’t get private student loans without a cosigner or credit history. If you don’t have strong credit, you’ll need to apply with a cosigner, such as a parent or close relative, who does.
Applying with a cosigner is typical for most undergraduates. According to data firm MeasureOne, the vast majority of private student loans (94%) were issued with a cosigner in the 2015-2016 school year.
Even if you can get approved on your own, applying with a creditworthy cosigner can help you snag a lower interest rate. Getting the lowest possible rate will reduce your cost of borrowing over the long term.
That’s why you and your cosigner should check out private student loan companies before choosing a loan. Apply for a quick rate quote from multiple lenders to see preliminary offers.
Besides comparison shopping, you and your cosigner should have an honest conversation about what it means to share debt. Both of you will be responsible for the loan, and your cosigner’s credit could get dragged down if you miss payments or enter student loan default.
By discussing expectations, you can prevent future conflicts.
3. Ask your parents to take out a Parent PLUS Loan on your behalf
Your third option for how to get student loans without strong credit involves the federal Parent PLUS Loan.
Parent PLUS Loans allow parents to take on student debt to help pay for their child’s college education. They come with a fixed interest rate of 7.00% and an origination fee of 4.264% as of Oct. 1, 2017.
Since your parents take out these loans, you’re not technically responsible for the debt. But you could work out an informal arrangement wherein you handle repayment after graduation.
Unlike Direct Loans, Parent PLUS Loans come with a credit check. If your parents have adverse marks on their credit history, they won’t qualify for this loan.
Parents that qualify can borrow up to your cost of attendance minus other financial aid you’ve received.
Before taking out a Parent PLUS Loan, you and your parents should familiarize yourselves with the repayment options for this loan type.
For instance, Parent PLUS Loans are eligible for these repayment plans:
- Standard Repayment Plan
- Extended Repayment Plan
- Graduated Repayment Plan
- Income-Contingent Repayment if you consolidate the loan first
Parent PLUS Loans don’t qualify for these repayment plans:
- Income-Based Repayment
- Pay As You Earn
- Revised Pay As You Earn
To take out Parent PLUS Loans, your family must submit the FAFSA. You should also speak with your school’s financial aid office for any additional instructions on how to apply. For example, you might be asked to request the loan through StudentLoans.gov.
Be proactive about building your credit
When you’re fresh out of high school, you don’t need strong credit to take out student loans. By submitting the FAFSA, you’ll be in the running for federal student loans, not to mention need-based grants and work-study.
But a good credit score will be important in the future, especially if you want to take out your own private student loans later. So take steps to build your credit, such as using a credit card responsibly and paying off your debt on time.
To further improve your credit, check out these 10 ways to increase your credit score.
Need a student loan?Here are our top student loan lenders of 2019!
|1 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). 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. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (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.
2 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.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* 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 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. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 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.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.26% – 13.26%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.62% – 11.47%*,4||Undergraduate and Graduate|
|4.38% – 13.38%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.47% – 12.34%8||Undergraduate, Graduate, and Parents|