Getting a student loan with bad credit is easier than most people think. Well it actually depends on what type of loan you are trying to get.
Your credit score is often the measuring stick a company will use to determine whether you qualify for a loan or not. It tells the lender how likely you are to eventually pay back the loan.
The higher your credit score is, the better chance you’ll qualify with a better rate when in comparison to someone with a lower credit score who may not qualify or if they do, it’ll likely be a higher rate attached.
Below I detail what is good vs bad, credit in relation to Federal student loans, and credit in relation to private student loans.
What’s Considered Bad Credit?
First things first, what is bad vs what is good?
Experian has 5 categories for how they categorize the credit score. The score ranges anywhere from 300-850. Below I have listed out how they categorize poor credit all the way to the exceptional category.
Poor Credit: 300-579
Fair Credit: 580-669
Good Credit: 670-739
Very Good Credit: 740-799
Exceptional: 800-850
Federal Student Loans With Bad Credit
With federal student loans, you have a lot of options available.
Even if you (or your parents) have bad credit, these loans are backed by the government which means they don’t require a credit check.
Each year, Congress sets a universal interest rate for the school year for everyone trying to take out a federal student loan, regardless of what your credit scores are.
As long as you qualify for federal loans via FAFSA, you’ll be eligible to get them even with bad credit.
Private Student Loans With Bad Credit
Knowing how student loans work is vital to saving money.
Most undergrads will not be able to cover the full cost of education with Federal loans. Therefore, you’ll have to get private loans with a company such as Sallie Mae. (Note: Most Graduate students do not have this problem)
If you have bad credit, it may be more difficult to qualify for obtaining a private loan should you need additional support on top of the federal loans.
Private student loans are not government backed and are usually obtained through independent financial institutions such as banks or credit unions.
These would be subject to a credit check and the higher your credit score, the likelihood of qualifying and getting a better rate increases.
If you have bad credit and can’t qualify on your own, then you’ll need to get a co-signer if you wish to get a private loan.
Student Loans with No Co-Signer
If you don’t have access to a co-signer, you’ll want to start with federal loans – Either subsidized or unsubsidized.
Subsidized are preferred first as this simply means the government pays for your interest while in school whereas unsubsidized loans will charge interest while in school.
So what happens if you can’t get a co-signer and you have bad credit or no credit at all?
First off, you likely won’t be eligible for any normal type of private loans without either good credit or a co-signer available. There are certain loans you could be eligible for that are based on things such as your GPA, major, estimated future earnings, etc. However, these loans are extremely hard to find.
The final thing you can do is to search and apply for as many scholarships and grants as you can.
Refinancing the Private Loans
If you have bad credit and had to get a co-signer or you did qualify on your own but ended up with a super high interest rate, once you graduate and begin working, you’ll eventually want to look into refinancing that private loan.
Refinancing is a process where you’d go to another separate private lender and they’ll write a check to pay off your old loan but then in return you get a brand new loan with a lower interest rate.
When you are ready to refinance, be sure to check out FitBUX’s student loan refinance service.
Conclusion
Getting a student loan with bad credit is easy if you are getting Federal loans. In fact, your credit won’t matter.
However, private loans will depend on your credit score and potentially the ability to have a co-signer.
If you need any help with this process and potentially refinancing your student loans, give us at FitBUX a call and we could go over your situation along with tailored advice.
