Best student loans for bad credit: September 2024

Pursuing a college degree can open doors to better career opportunities, but the cost of higher education can be daunting.

For the 2023-24 school year, students faced average costs of around $34,790 at private colleges and $20,310 at public institutions, according to the College Board. Even community colleges come with a price tag, averaging $3,990.

Filling out the Free Application for Federal Student Aid (FAFSA) can help ease the burden by providing access to low-interest federal student loans, work-study programs, and grants. However, these options might not cover your entire bill.

Private student loans can fill the gap between federal aid and your total college costs, but securing this funding can be challenging if you have bad credit. The good news is, you still have options. Here are our picks for the best student loans for bad credit. 

Current private student loan rates

Best student loans for bad credit

Methodology

FOX Money evaluated these student loan lenders based on interest rates and origination fees, loan amounts, loan terms, discounts, whether cosigners are accepted, and more. FOX Money’s team of experts gathered information from each lender’s website customer service department, directly from our partners, and via email support. Each data point was verified by a third party to ensure it was accurate and current.

Federal loans for bad credit

Federal student loans can offer a lifeline if you have a less-than-ideal credit score. Most federal loans don’t require a credit check, making them the best option for borrowers with bad credit. Interest rates for federal student loans are fixed and set annually — meaning everyone who takes out a loan during the same period will pay the same interest rate, regardless of credit score.

Direct Subsidized Loans offer the added advantage of the government paying your interest while you’re in school and during other periods of deferment. However, this loan is only available to undergraduate students who demonstrate financial need via the Free Application for Federal Student Aid (FAFSA).

Direct Unsubsidized Loans are available to undergraduate and graduate students, regardless of financial need. But unlike subsidized loans, you’re responsible for paying all the interest, which starts to accrue as soon as the loan is disbursed. 

Private vs. federal student loans for bad credit

The main difference between federal and private student loans is the institution giving you the loan and the terms that come with it. 

The government offers federal student loans with benefits like fixed interest rates, income-driven repayment plans, and options for deferment or forbearance (where you can temporarily stop making payments under certain conditions). They also provide opportunities for loan forgiveness in certain situations, such as employment in public service or education. 

You don’t need a credit check for most federal student loans (except for Direct PLUS loans), and you won’t need a cosigner either. 

On the other hand, private student loans are offered by banks, credit unions, and other private lenders. Interest rates for these loans can be fixed or variable and are often based on your credit score, meaning you might need a cosigner to get the best rates. 

Private loans also don't typically offer as generous repayment terms, and you're less likely to find options for loan forgiveness. They also don’t have income-driven repayment plans, and the options for deferment or forbearance are not as flexible.

Related: How do student loans affect my credit score? 

How to choose the right bad credit student loan 

Choosing the right student loan when you have bad credit can be tricky, because you don't want to take on more debt that you can handle. Here's how to navigate the process: 

• Start with federal loans. Federal student loans don't have a credit score requirement and often come with lower interest rates and more flexible repayment terms than private student loans.
• Consider a cosigner. If you need to explore private student loans, having a cosigner with a strong credit profile can significantly increase your chances of approval and help you qualify for a lower interest rate. 
• Compare private lenders. Not all lenders offer the same terms. If you're not able to secure a cosigner, look for lenders that specialize in working with students with bad or no credit. For example, Ascent offers. anOutcomes-Based Student Loan for student borrowers without established credit or a cosigner.
• Prequalify to find the best loan terms. Prequalifying with multiple lenders can help you see what rates and terms you might qualify for before you submit a formal application. This step can help you identify the best offers before you commit to a loan, and prequalification won't affect your credit score.

Eligibility requirements

Private lenders establish underwriting criteria to minimize the risk of accepting a borrower who is highly likely to default on their loan (i.e., not making payments on time or at all).

Generally, some factors they consider include your:

• Credit score. When applying for a private student loan, the lender will usually perform a hard credit check to assess your record of repaying debts and determine whether you’ve had late payments, missed payments, defaults, or bankruptcies. 
• Income. To determine if you can repay the loan, they’ll look at how much you earn and your other assets. 
• School. Private lenders will also check whether you’re enrolled at an eligible school and/or program. 
• Degree program. Your eligibility can be affected by whether you’re pursuing an undergraduate, graduate, or postgraduate degree. 
• Enrollment status. Lenders want to know whether you’re attending school half- or full-time.

You might need help fulfilling some of these requirements, especially if you’re just out of high school. Similarly, returning students might have made poor borrowing decisions in the past or not have adequate income to qualify for a private loan.

Having no credit or bad credit can be problematic for students who need a private student loan. However, bringing on a cosigner with strong credit could help you qualify. 

Do I need a cosigner?

Adding a cosigner to your private student loan application can be helpful in a couple of ways. If you don’t meet lenders’ minimum eligibility criteria, a cosigner with strong credit can help you qualify for the loan. Additionally, a cosigner might help you get lower rates than you could get alone.

A cosigner is a trusted person who accepts the financial responsibility for repaying your loan if you don’t. As the primary borrower, you’re still responsible for making your payments. However, if you fail to repay the debt, the lender or its debt collection agency will seek payment from your cosigner. Also, late or nonpayments negatively impact their credit — and yours.    

Not all private lenders accept cosigners on their education loans. Those that do might offer a cosigner release option. After meeting the lender's specific payment requirements, you can remove your cosigner from your loan agreement. For example, you might be required to make at least 24 on-time monthly payments or meet other requirements before getting approved for cosigner release.

How to get student loans with bad credit

Here’s how to improve your chances of getting a loan:

• Submit the FAFSA. Apply for federal student loans first, regardless of your credit situation. Submitting this form each school year lets you see if you qualify for a fixed-rate Direct Loan and other types of federal aid. Many states also use this form to determine your eligibility for state-funded aid.    
• Find a cosigner. A cosigner is typically a relative, like a parent, grandparent, or sibling. Your spouse can also be a cosigner on a private education loan. Regardless of who agrees to cosign your loan, they must meet the lender’s minimum credit score requirement and other borrowing criteria. 
• Improve your credit score. Raising your credit score can position you as a stronger applicant on your next private student loan application. This process takes time, but making full, on-time monthly payments and paying down your debts on other loans and credit card accounts are just a few ways to improve your credit.

FAQ

Can you get student loans with a 500 credit score?

If your credit score is 500, you may still be able to access student loans for school. The first option to consider is federal student loans. Generally, federal loans don’t require a credit check, and you can choose from subsidized and unsubsidized loans, depending on your eligibility. For private student loans, some lenders let you apply with a cosigner with strong credit, which might improve your odds of getting a student loan at a lower rate.

Can you get the FAFSA with bad credit?

You can apply for the Free Application for Federal Student Aid (FAFSA) regardless of your credit history. Your credit isn’t a factor for most federal student loans; however, you must meet the basic eligibility requirements (citizenship status, enrollment, etc.) to qualify for federal aid.

What is the minimum credit score for a federal student loan?

The Department of Education doesn’t have a minimum required credit score for its Direct Loan program. Its subsidized and unsubsidized loans don’t require a credit check. A credit check is performed for Direct PLUS Loans; you must not have adverse credit. If you have bad credit, you might still qualify for a PLUS loan if you meet certain requirements.

What is the easiest student loan to get?

Federal student loans are the easiest loans to get since most don’t have a minimum credit requirement. Your federal loan eligibility is determined using the same FAFSA application you’d use for other student aid, like grants and federal work-study.