If you're planning on going to college, you'll likely need to take out student loans to pay for school. According to The Institute for College Access & Success, 65% of college seniors who graduated from universities in 2018 left school with education debt.
It's best to exhaust all of your federal student loan options before even considering private student loans. Rates for federal loans issued between July 1, 2020 and June 30, 2021 will drop from 4.53% to 2.75% for undergraduate Stafford loans.
However, having less-than-stellar credit can make qualifying for student loans difficult. Private student loan lenders base their decision on your income and credit history. As a college student, you likely have poor credit or no credit at all, so you'll struggle to find a lender willing to work with you.
To help borrowers pay for college, we looked at the top lenders in the country to identify the best student loan options for people with bad credit.
Best Private Student Loans for Bad Credit
- Earnest: Best With a Cosigner
- Ascent: Best Without a Cosigner
Earnest: Best With a Cosigner
If you have access to a cosigner, Earnest might be able to offer you a student loan. Its minimum credit score requirement for a cosigned student loan is 650 for the cosigner, and no score is required for the student. That's the lowest credit score requirement of the lenders we've reviewed.
While the minimum credit score is low, there are factors for approval that might make getting an Earnest private student loan difficult.
- You must be enrolled in school full-time if you're a Freshman, Sophomore, or Junior or at least half-time for Seniors and Graduate students.
- You must have enough savings to cover at least two months of normal expenses, including housing.
- You can't carry large amounts of non-student, non-mortgage debt (e.g. credit cards, personal loans).
- You must prove you spend less than you earn and show increasing bank account balances.
If you meet those guidelines and Earnest's other eligibility requirements you can get competitive rates on a cosigned student loan. With a 0.25% autopay discount current interest rates are:
- Variable Rates: 1.24% to 11.44%
- Fixed Rates: 3.55% to 12.78%
With Earnest, you can borrow $1,000 up to the total cost of attendance of your program with loan terms of five, seven, 10, 12, or 15 years.
Read more about Earnest student loans in our full review.
Ascent: Best Without a Cosigner
Ascent offers two non-cosigned private student loans. The first is credit-based, students with a credit history need at least a score of 680.
The other is a Non-Cosigned Future Income-Based Loan. College juniors and seniors with no credit score or a score below 680 may be eligible for a non-cosigned loan if they're enrolled full-time in a degree program at an eligible institution
Ascent private student loans have competitive interest rates. Interest rates for non-cosigned loans with a 0.25% autopay discount are currently:
- Variable Rates: 2.71% to 12.99%
- Fixed Rates: 3.53% to 14.50%
With Ascent you can borrow $2,000 to $200,000. As an added perk, the lender offers a 1% cash back reward when you graduate if you meet certain terms and conditions.
Read more about Ascent student loans in our full review.
Can You Get a Student Loan With Bad Credit?
Before you start looking for a lender, you need to understand where your credit score stands. Experian—one of the three major credit bureaus—listed the following FICO score ranges:
- Very Poor: 350–579
- Fair: 580–669
- Good: 670–739
- Very Good: 740–799
- Exceptional: 800–850
When it comes to student loans, federal education loans are your best option if you have poor credit. That's because—of the 12 national private student loan lenders we looked at—only four publicly listed their minimum credit requirements. With those four lenders, the minimum credit score they'd accept was in the fair to good range—none would accept applicants with very poor credit on their own.
Unfortunately, getting a student loan with bad credit is difficult unless you have a cosigner with very good or exceptional credit and a steady income.
How to Get a Student Loan With Bad Credit
While qualifying for a student loan with bad credit is hard, it's not impossible. If you need help financing your education, use these three tips:
1. Apply for Federal Student Loans
Most federal student loans don't require a credit check. For college students with bad credit or no credit, federal loans can be an excellent option. Depending on the type of loans you qualify for, you can borrow up to the total cost of attendance. And, federal student loans tend to have lower interest rates and better repayment options, making them a better choice than private student loans.
If you haven't already, complete the Free Application for Federal Student Aid so that your school and the U.S. Department of Education issue you all the financial aid and student loans you're entitled to receive.
2. Add a Cosigner to Your Loan Application
Unfortunately, federal loans may not be enough to cover the full cost of your education. If that's the case, taking out private student loans can help you get the money you need to finish your degree.
Most private student loan lenders have strict borrower requirements. You typically need to have a credit score in the fair to exceptional range to qualify. If you have poor credit, you're unlikely to get approved for a loan by yourself.
One way around lenders' credit requirements is to add a cosigner to your application. A cosigner is usually a friend or relative who has very good credit and steady income. They apply for the loan with you and agree to take on responsibility for the loan if you fall behind. If you miss payments, the cosigner is responsible for making them in your stead.
Adding a cosigner to your application reduces the lender's risk, making you a more attractive loan candidate. By adding a cosigner to the loan, you're more likely to get approved and qualify for a lower interest rate than if you applied on your own.
3. Shop Around
Each private student loan lender has their own borrower criteria. If you can't get approved for a loan from one lender, shop around and see if you meet another lender's requirements. Many lenders, including Education Loan Finance and College Ave, allow you to get a rate quote with just a soft credit inquiry, which has no impact on your credit score.
Bad Credit Loans Without a Cosigner
If you don't have anyone you can use as a cosigner, your student loan options are limited.
Of the 12 lenders we reviewed, only two listed on their website that they would work with borrowers in the fair range. Its minimum credit score for borrowers without a cosigner is 650. All other lenders require your score to be in the good to exceptional range.
If you decide to apply for a loan with Earnest, you'll need to borrow at least $1,000. You must enroll in school full-time and be pursuing a bachelor's degree or a graduate degree. Your credit history must be at least three years old, and you need to have an annual income of at least $35,000.
Because most students won't meet the income and credit requirements on their own, you'll likely need to add a cosigner to your application to qualify for a loan. If a potential cosigner is hesitant, assure them there are several options later down the line for removing their name from the loan, such as refinancing it.
Why Federal Loans Are a Better Option
If you have bad credit, federal loans probably make more sense for you than private student loans. The U.S. Department of Education has a few different lending options for students, most notably Federal Perkins Loans and the Federal Direct Loan Program. Other than federal Direct PLUS Loans, federal student loans don’t require a credit check. Even if you have poor credit, no credit, or unsteady income, you can still qualify for a loan.
Plus, federal student loans offer other benefits. If you can't afford your payments after graduation, you can enter into an income-driven repayment plan to reduce your minimum monthly payment. If you lose your job or face a medical emergency, you can postpone making payments on your debt through federal forbearance or deferment. And, in some cases, you could even qualify for loan forgiveness.
Because of these perks, make sure you exhaust all of your federal student aid options before exploring private student loans.
The Bottom Line
Finding student loans with bad credit can be challenging. However, it's always a good idea to start with federal student loans in the first place. Although federal loans aren't without their own limitations, you're still more likely to qualify for a loan, and you'll get lower interest rates and more benefits than you would with private loans.
If you still need money to pay for school after using federal aid, applying for a private student loan with a cosigner can help fill the gap. By shopping around and comparing offers from different lenders, you can find a lender that works for you.
Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of student loan lenders. We collected over forty-five data points across more than fifteen lenders including interest rates, fees, loan amounts and repayment terms to ensure that our content helps users make the right borrowing decision for their education needs.
The Institute for College Access & Success. "Student Debt and the Class of 2018." Accessed July 15, 2020.
Earnest. "Eligibility Guide." Accessed July 15, 2020.
Earnest. "Student Loan Rate Disclosures." Accessed July 31, 2020.
Ascent. "Cosigned Student Loans Designed With You in Mind." Accessed July 15, 2020.
Federal Student Aid. "Federal Student Loans for College or Career School Are an Investment in Your Future." Accessed July 15, 2020.
Education Loan Finance. "Student Loan Refinancing Made Simple." Accessed July 15, 2020.
College Ave Student Loans. "Undergraduate Student Loans." Accessed July 15, 2020.