Even though I received a scholarship to attend school, I knew it wouldn’t be enough to completely cover the costs. After all, going to college isn’t just about the tuition. You also need to buy books and pay for a place to live.
I knew I needed student loans, but I was 18 years old with no credit history. Here’s how I managed to get student loans with no credit — and how you can, too.
Getting federal student loans with no credit
There’s no credit check when you apply for undergraduate federal student loans. Instead, what you borrow is based on need and how much it costs to attend your school.
The Free Application for Federal Student Aid (FAFSA) allows you to access federal student loans. You provide information about how much money you make, and what you have saved up. Your parents’ incomes and assets are also considered. Other considerations, like whether you have a scholarship offer, are also taken into account.
Once you fill out the FAFSA, the information is sent to the schools of your choice. They put together a financial aid package, which can include grants as well as subsidized or unsubsidized students loans. My first year of college, I only qualified for unsubsidized student loans, which meant the government wouldn’t pay my interest while I was in school, as is done with subsidized loans.
Thanks to the federal loan program, I was able to get student loans with no credit, and without the need for my parents to go into debt for my higher education. However, in order to keep taking advantage of federal loans, you have to fill out the FAFSA each year. You’ll only get enough money in loans to get you through a single year of schooling otherwise.
Completing the FAFSA each year allows your school to reassess your ability to pay for college. If you have siblings attending college, or if your family’s financial situation has changed, you could be offered a different financial aid package the next year. No matter what, though, you won’t need to go through a credit check to qualify.
Getting private student loans with no credit
Unfortunately, there are situations where federal help just isn’t enough to pay for your college-related expenses. When that happens, you might have to turn to private student loans.
Private lenders are much pickier about your credit situation. For me, the cost of grad school was beyond the limits set for federal loans. To bridge the gap, I turned to private lenders who wanted to check my credit. Luckily, during my time as an undergrad and in the two years after, I had built my credit score. My credit was good enough to allow me to borrow money from a private lender.
That isn’t the case for everyone. So, how do you get student loans with no credit when private lenders care so much about it?
The answer is a cosigner. If you don’t have a credit history, a cosigner with good credit can save the day. In fact, my husband didn’t have a thick enough credit file and was unable to get a private student loan by himself. I cosigned his student loan so he could start grad school.
You do have to be careful with private student loans, though. Even though it’s possible to borrow money at a lower interest rate than what federal loans charge, your situation could lead to a higher interest rate. Federal student debt comes with prescribed interest rates. Private student loans don’t.
Finding a cosigner
A cosigner is one way to close your college funding shortfall without having a credit history. I felt good about cosigning my husband’s debt because we shared finances as a married couple and the amount was relatively small — only $4,000.
And that’s exactly where you should start when looking for a cosigner. Family and friends are more likely to cosign for you because they know you and your goals.
As you look for a cosigner, point out your ability to repay the loan later. Back up your assertions with the fact that you have met other obligations in the past. Showing that you are responsible and willing to repay the debt can go a long way toward helping you secure a cosigner.
Even though cosigners take on responsibility for the loan, they might be willing to brave the risk to help you. Agree to remove their name from the loan or refinance your student loans when you finish school and have a job.
Work on building your credit throughout college so you have the ability to take on your obligations without help. That way, your cosigner knows they won’t be on the hook forever.
Rather than trying to get student loans with no credit, it’s possible to turn to an income-share agreement. Schools like Purdue University are trying out these arrangements, in which students promise a percentage of their future earnings to investors willing to pay for their schooling.
It’s not exactly a loan, though. You promise that a percentage of your income will go to a benefactor. Usually, according to Business Insider, you surrender a portion of your income for no more than 10 years.
So, the backer essentially takes a chance. “If graduates get good jobs with nice salaries, those investors can make out quite nicely,” reported Business Insider. “But investors also assume the risk that the graduates could end up at low-paying jobs or, worse, unemployed.”
Depending on the terms of the income-share agreement, you could end up paying less than if you borrowed the money, thanks to interest saved over the course of several years — especially if your alternative is a private student loan with a higher interest rate.
Looking for ways to pay for college
In the end, paying for college is about assembling your resources. If you have time, you can save up using something like a 529 plan to reduce your need for student loans. You can also work part time during school, or apply to be a resident advisor for the free housing (like I did for two years in undergrad).
Student loans are only part of the puzzle when it comes to paying for your higher education. They are an important part, but they aren’t the only part. Review your options and get creative. If you can avoid getting student loans, or reduce what you borrow, your credit becomes less important — and you can avoid some of the interest costs that come with loans.
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
|4.23% – 13.23%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 10.11%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|