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How to Get College Loans with Bad Credit or No Credit

Instructor: Kristin Fromal

Kristin is a school counselor and has a Master's degree in Social Work.

With the high cost of college, student loans may be a necessity in order to complete a degree. Prospective students with bad credit or no credit still have options when it comes to student loans.

Complete the FAFSA

The Free Application for Federal Student Aid, or the FAFSA, is an important document when beginning the process of applying for college loans. Completing the FAFSA really should be the first step for anyone on a quest to secure loans or other financial aid. You will create a login, and then gather and input relevant financial information such as federal tax information, available cash resources, and farm or business assets. If you are a dependent student, you will need your parent's financial information as well. You can choose up to ten schools to receive your FAFSA information online or four schools if using a PDF form and can switch to others later if there's a need to do so.

Federal Student Loans

Federal student loans are typically the first avenue from which to seek college loans, because students do not need to make repayment while they are still enrolled in school at least half time. These loans often have a lower interest rate than private loans. If your income qualifies you for Stafford or Perkins loans loans, your lack of credit or poor credit won't disqualify you from receiving loans. These federal programs do not require borrowers to complete a credit check before borrowing up to federally-approved amounts. Federal PLUS loans do require a credit check. Students with an adverse credit history may still qualify for these loans if they document the extenuating circumstances that lead to the adverse history, or if they obtain an endorser whose credit history is clear.

You will receive a financial aid offer from the university you plan to attend that includes the amount of federal student loans for which you qualify. Once you decide to accept these loans, you will need to attend entrance counseling and sign a master promissory note. Depending on what year you are in school, it's possible for undergraduates to borrow between $5,500 and $12,500 of subsidized and unsubsidized federal student loans.

Can Everyone Get Federal Loans?

There are some circumstances in which federal student loans will not be an option:

  • Those who are currently incarcerated
  • Prospective students with a conviction on record for certain drug-related offenses
  • Former students who have already borrowed from this program and defaulted on the loans may not qualify
  • Citizenship status will be considered when awarding federal student loans
  • Students who do not meet academic progress standards may not qualify for continued loans

Private Loans

Private student loans are made by a bank or credit union for the purpose of obtaining a college education. Private student loans are usually credit-based. Particularly if your credit is poor, it's best to exhaust federal options before seeking a private loan for college. You can wait until you receive your award letter detailing other forms of financial aid before applying for a private loan. One common way to apply for private loans if you have poor or no credit, or aren't old enough to qualify for a loan, is to request a parent or other creditworthy adult to be a cosigner on the private loans. You and your cosigner will both need to complete portions of the loan document.

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Transferring credit to the school of your choice

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