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Best Student Loans for Bad Credit
Many students need a private student loan to supplement their federal student loans. Getting one can be a challenge if you can’t find a cosigner with good credit and you don’t have an established credit history. But there are options for funding your education.
Written by:Lindsay Frankel
Federal student loans have limits that don’t always cover the
cost of tuition and fees, which average up to a whopping $35,807 per year for
private university students. You may also need money to cover room and board.
But you shouldn’t let the high costs deter you from studying — despite
increases in tuition, getting a degree remains a good investment for most
borrowers. And there are options for applying with a bad credit cosigner,
getting an outcomes-based loan, or signing up for an income share agreement. To
help you get the right student loan for you, our team of financial experts
reviewed and ranked more than 30 online lenders and chose the best student
loans for bad credit.
Top Picks for The Best Best Student Loans for Bad Credit
- Federal Direct Loans — Best Overall
- Stride — Best for Income Share Agreements
- MPower Financing — Best for International Students
- Funding U — Best for High-Achieving Students
- Ascent — Best for Flexible Repayment
Best Student Loans for Bad Credit in 2024 — Full Overview
Federal Direct Loans — Best Overall
Federal Direct loans for students don’t require a credit check or a cosigner, and they offer low, fixed rates, making them the best option for students with no credit history. If you are determined to demonstrate financial need, you also may qualify for Federal Direct Subsidized Loans, for which the government pays the interest. However, low borrowing limits mean these loans may not cover all your educational expenses, especially if you’re still a dependent.
Pros
Cons
Direct Subsidized and Unsubsidized Loans are available in amounts capped at between $5,500 and $20,500 annually, depending on your dependency status and year in school. There is no credit check for either of these loans, but there is for Direct PLUS loans issued to parents or graduate students. If you’re a dependent and your parents are ineligible for a Direct PLUS Loan, you may be eligible for more unsubsidized funding. There’s also an aggregate loan limit of $57,500 for undergraduates and $138,500 for graduate and professional students. Interest rates are fixed at 4.99% for undergraduates and 6.54% for graduate or professional students.
Another advantage is that you can choose from several repayment plans, including a 10-year Standard Plan, Graduated Repayment Plan, Extended Repayment Plan, Pay As You Earn Repayment Plan, Income-Based Repayment Plan, Income-Contingent Repayment Plan, and Income-Sensitive Repayment Plan. Eligibility requirements vary.
The Bottom Line
You should start by filling out the FAFSA, the application for federal student aid, as it’s your best chance at getting funding at the lowest rates if you have no credit history. Just be aware that annual limits set by your school and the government may make it difficult to cover all your expenses. Though parents can take out a Direct PLUS Loan to fund the price gap, they can’t have an adverse credit history or they won’t be approved.
Try Direct LoansRead more in the full Federal Direct Loans review.
Stride — Best for Income Share Agreements
Stride offers graduate students and some undergraduate students the option to repay funding from Stride as a percentage of your income over five years. These agreements come with a 3-month grace period, payments as low as 2.00% per $10,000 you earn, and ongoing career support. What’s more, you won’t have to make payments if your income ever falls below the minimum threshold.
Pros
Cons
You can get up to $25,000 per year from Stride, and you won’t have to begin repayment until three months after graduation. The typical repayment term is five years. You’ll be given a rate based on your projected earnings and the length of your program, with rates starting as low as 2.00% for every $10,000 earned. You won’t have to pay anything if you earn less than the minimum threshold specified in your agreement. There’s no minimum credit score or cosigner requirement, but Stride will look for major credit issues that may disqualify you. Not all schools or programs will be eligible, either.
The Bottom Line
If you’re looking for a shorter repayment term with downside protection and ongoing career support, Stride’s Income Share Agreements may be your best option. Plus, you can get approved with no credit history, even if you don’t have a cosigner. However, not all students will be eligible for Stride based on their school and course of study.
Try StrideRead more in the full Stride review.
MPower Financing — Best for International Students
MPower is a public benefit corporation dedicated to empowering international students. MPower provides student loans to international students from over 190 countries attending a top college or university in North America, with more than 350 eligible schools. U.S. Citizens can also qualify for funding from MPower. Interest rates are higher than at some other lenders, but there’s no minimum credit score or cosigner requirement. However, you must be within two years of graduation to qualify.
Pros
Cons
You can borrow between $2,001 and $100,000 from MPower to use for all educational-related purposes. The fixed interest rate before discounts ranges from 7.99% to 13.99%, but you can get up to a 1.5% interest rate discount for things like setting up Autopay and making on-time payments. There will be a 5% origination fee added to your loan balance. You must make interest-only payments while you are in school and until six months after graduation, when full repayment of principal plus interest begins over a term of 10 years.
The Bottom Line
If you can’t qualify for other types of funding, MPower could be a good option, especially if you’re an international student. However, the hefty origination fee, relatively high interest rates, and lack of repayment flexibility make these loans riskier than some other private student loans. And not everyone will qualify.
Try MPowerFinancing
Read more in the full MPowerFinancing review.
Funding U — Best for High-Achieving Students
If you’re an undergraduate student with no credit history looking for a no cosigner student loan, Funding U is one option that provides loans based on your academic achievement. You’ll need to meet certain GPA requirements and your school will need to meet certain graduation rate requirements for you to qualify. Additionally, Funding U will run a credit check, and derogatory marks like missed payments could interfere with getting approved for a loan.
Pros
Cons
You can borrow between $3,001 and $20,000 per year from Funding U with an aggregate limit of $75,000, which may vary depending on your school and state of residence. Fixed rates range from 6.99% to 12.49% with Autopay and there are no fees except a $25 returned payment fee. The repayment term is 10 years, and you have the option to make $20 or interest-only payments while you’re in school or defer payment until six months after graduation. There are no minimum credit score or financial requirements to qualify, but credit issues could hurt your chances. You’ll also need to meet certain academic achievement standards.
The Bottom Line
If you’re a good student with no credit history, Funding U is a great way to get a loan without a cosigner. The lender charges few fees and offers a six-month grace period plus a forbearance program. Just be aware, you’ll likely pay higher rates than if you applied with a creditworthy cosigner at another company.
Try FundingURead more in the full FundingU review.
Ascent — Best for Flexible Repayment
Ascent offers non-cosigned student loans for juniors and seniors. Students can choose between a credit-based loan, which has a lower minimum credit score requirement than many other lenders, and outcomes-based loan. Ascent also offers cosigned loans for undergraduate students and international students, along with bootcamp and career loans. You can choose from a variety of repayment terms and enjoy a grace period of up to nine months.
Pros
Cons
You can borrow between $2,001 and $20,000 per year from Ascent with an aggregate loan limit of $200,000. There are no origination fees or prepayment penalties on any of Ascent’s loans. Interest rates range from 7.38% to 14.54% for non-cosigned, credit-based loans, 11.86% to 12.85% for non-cosigned, outcomes based loans, and 4.81% to 12.79% for cosigned undergraduate loans. You can also choose a lower variable rate with any loan option.
You can repay the loan over 5, 7, 10, 12, or 15 years and defer repayment up to 9 months after graduation. You can also opt to make interest-only or $25 payments while you’re in school. Minimum credit scores vary and are subject to change, while the minimum income for credit-based loans is $24,000. However, there is no minimum credit score or income requirement for juniors and seniors applying for an outcomes-based loan.
The Bottom Line
Ascent has options for students with fair credit applying with a cosigner and juniors and seniors with no credit history applying for a non-cosigned loan, but freshman and sophomore students with no credit history who don’t have a creditworthy cosigner won’t be served by Ascent. For those who are eligible, Ascent offers a generous autopay discount and graduation reward, a long grace period, and flexible repayment terms.
Try AscentRead more in the full Ascent review.
Sparrow — Best for Student Loan Comparison
Sparrow lets you compare student loan rates and terms with one streamlined application process. There are options for students with bad credit or no credit history — in fact, Sparrow partners with many of the lenders on this list. Sparrow also provides a convenient platform to make payments on all your student loans in one place. The main drawback is that you may receive marketing emails from Sparrow’s partner lenders after prequalifying.
Pros
Cons
Lenders on the Sparrow platform offer amounts starting at $1,000 up to the full cost of attendance minus aid. Fixed APRs range from 2.99% to 12.99% and variable APRs range from 0.99% to 11.98%. Loan terms vary by lender, but there are options for 5, 7, 8, 10, 12, 15, or 20 years. Fees vary as well, but there are no prepayment penalties. There are also no minimum credit or income requirements. And checking your personalized rates with Sparrow only requires a soft credit check, so it’s risk free.
The Bottom Line
If you’re planning to compare a handful of student loan lenders, Sparrow offers a convenient and efficient process for checking your personalized rates. You might get emails or calls from Sparrow’s partner lenders, but you’ll be able to see your options side-by-side and manage your loan payments in one place.
Try SparrowRead more in the full Sparrow review.
Fiona — Best for Student Loan Refinancing
Refinancing typically requires good credit, but Fiona has more options for people with a variety of credit histories than some other refinancing aggregators. If your credit has improved since you took out your student loans, it may be possible to secure a lower rate by refinancing with one of Fiona’s lending partners.
Pros
Cons
Fiona is a loan comparison marketplace offering student loan refinancing with no minimum income or credit score requirements, but the aggregator notes that the most attractive offers will require a credit score of 650 or above. Rates, terms, and loan amounts vary by lender, but you can see what’s available to you after answering a handful of questions.
The Bottom Line
If your credit score has improved since you first applied for your student loans, refinancing could save you money on interest. Fiona is one of the best options available to fair credit borrowers to check their personalized rates for refinancing from a selection of lenders.
Try FionaRead more in the full Fiona review.
How to Choose the Best Student Loan for Bad Credit
When evaluating the best student loan companies for bad credit, our team of financial experts considered the following factors, which may be helpful for you to keep in mind as you compare your options.
- Loan Features: Look for a lender that offers the amount you need and evaluate the repayment terms to make sure they’re feasible.
- Interest Rates and Fees: Consider the minimum and maximum APRs offered by each student loan lender and any additional fees they charge. Avoid lenders that charge prepayment penalties.
- Qualification Process: Check your credit with your cosigner and choose lenders that align with your score. Make sure there are no minimum income requirements or restrictions on schools or fields of study that would preclude you from qualifying.
- Application Process: Check your rate with lenders that allow you to prequalify with a soft credit pull. Also evaluate the ease and speed of the application before you start.
- Customer Support: Choose a lender with an online portal that allows you to complete most transactions online. In case you have issues, make sure you can reach the lender’s customer support team at a convenient time.
- Online User Reviews: Check out what borrowers are saying about the company on third-party review websites such as Trustpilot. Look at the one-star reviews, if there are any, and check for any concerning patterns.
- Perks and Bonuses: Some lenders offer payment flexibility or discounts and rewards. Pay attention to any features that make a particular loan product stand out.
Best Student Loans for Bad Credit — Feature Comparison
| Company | Est. APR | Loan Amount | Loan Term |
| Federal Direct Loans | 4.99% to 6.54% | Up to $20,500 | 10 years |
| Stride | N/A | Up to $25,000 | 5 years |
| MPower | 7.99% to 13.99% | $2,001 to $100,000 | 10 years |
| Funding U | 6.99% to 12.49% | $3,001 to $20,000 | 10 years |
| Ascent | 4.81% to 12.85% | $2,001 to $20,000 | 5 to 15 years |
| Sparrow | 2.99% to 12.99% | $1,000 and up | 5 to 20 years |
| Fiona | Varies | Up to $250,000 | Varies |
Federal Student Loans for Bad Credit
Direct Subsidized Loans
Available to undergraduate students who demonstrate financial need, direct subsidized loans are capped at $3,500 to $5,500 annually, depending on your year in school. The U.S. Department of Education pays the interest that accrues on direct subsidized loans while you’re in school at least half time, for six months after you graduate, and during times of deferment. That reduces the total cost of borrowing when compared to an unsubsidized loan. During periods when you’ll need to pay interest, the rate is 4.99%. You’ll have your choice of a variety of payment plans, including income-driven repayment plans.
Direct Unsubsidized Loans
These loans offer the same access to flexible repayment plans as direct subsidized loans, but students pay all associated interest. The interest rate is currently 4.99% for undergraduate students and 6.54% for graduate or professional students. These fixed rates will be lower than the rates on private student loans for most borrowers. Undergraduate unsubsidized loan limits are between $5,500 and $7,500 for dependent students, depending on your year in school, while independent students or those whose parents don’t qualify for Direct PLUS Loans can qualify for up to $12,500. Graduate unsubsidized loans are capped at $20,500.
Direct PLUS Loans for Parents or Grad Students
These loans require a credit check and are typically not available to borrowers with an adverse credit history. They’re offered to parents of undergraduate students and independent graduate students. Direct PLUS loans are intended to cover college costs not funded by other aid, and the maximum amount you can borrow is the full cost of attendance minus any other aid received. Grad students get access to the full range of repayment plans, while options for parents are more limited. The current interest rate on Direct PLUS loans is 6.28%.
Private Student Loans for Bad Credit
While most student loan debt comes from federal student loans, sometimes federal student loans don’t cover the full cost of tuition. And if your parents have bad credit and can’t qualify for a Direct PLUS loan, you may need to seek funding from a private lender. About 13% of students take out private student loans for college. Though private student loans typically have stricter credit requirements, some lenders are more lenient than others. Income share agreements and outcomes-based loans are available for students with no credit history. And private student loans typically have higher limits, so you can fill in the gap between the federal funding you receive and the cost of your education.
Federal vs Private Student Loans Summarized
| Private Student Loans | Federal Student Loans | |
| Maximum Loan Amount | Up to the full cost of tuition | Undergraduates: Up to $12,500 per year Graduate Students: Up to full cost of tuition Parents: Up to full cost of tuition |
| Interest Rates | As low as 2.99% fixed | 4.99% for undergraduates or 6.54% for graduate students |
| Additional Fees | Varies by lender | Direct subsidized and unsubsidized loans: 1.057% disbursement fee Direct PLUS loans: 4.228% disbursement fee |
| Qualification Requirements | Good credit, academic achievement, career potential, or a creditworthy cosigner | Direct unsubsidized loans: Be enrolled at least half time in a degree program Direct subsidized loans: Demonstrate financial need Direct PLUS loans: No adverse credit history |
| Advantages | High borrowing limits Perks that vary by lender | Low, fixed interest rates No credit requirements for direct subsidized and unsubsidized loans |
| Disadvantages | APRs can be higher Not eligible for student loan forgiveness Fewer repayment plan options | Low borrowing limits Loan disbursement fee |
How to Shop for a Student Loan with Bad Credit
- Fill Out the FAFSA: Since federal direct student loans are the easiest student loans to get with bad credit, start by filling out the free FAFSA to see what kind and how much federal aid you’re eligible for. You may be offered grants, scholarships, work-study programs, and/or loans.
- Apply for a Direct PLUS Loan: If the federal aid offered to you isn’t enough to cover your tuition costs, apply for a direct PLUS loan as a graduate student, or ask your parents or guardian to apply for a Parent PLUS Loan.
- Consider Cosigned Private Loans: If you or your parents can’t qualify for a Direct PLUS loan and you need more money for school, consider asking another creditworthy friend or family member to cosign your private student loans, which will help you access the lowest rates.
- Compare Private Lenders: If you don’t have a creditworthy cosigner, look for low credit student loans you can get on your own. These may include outcomes-based loans or income share agreements. This guide includes some of the best places to get a student loan with bad credit. Prequalify with a few private lenders to get an idea of the cost of borrowing.
- Formally Apply: Choose the private student loan lender that best meets your needs and fill out a formal application. If the application requires a hard credit check, you’ll notice a small dip in your credit score.
How to Build or Improve Your Credit Score for a Student Loan
If you or your parents have bad credit or no credit history, there are a few things you can do to improve your chances of qualifying for a student loan.
- Get a Credit Card and Use it Responsibly: If you have a friend or family member with good credit, you can ask to be added as an authorized user to benefit from their credit history. If not, apply for a starter credit card of your own. If you’re already enrolled in school, a student credit card might be your best bet. Otherwise, a secured credit card can be a good option. Just be sure to make some purchases with your credit card and pay your bill on-time and in-full every month.
- Consider a Credit Builder Loan: With a credit-builder loan, you’ll deposit money into a savings account and receive a lump sum equal to the balance. You typically can’t access the money in the account until you’ve repaid the loan completely. As you make on-time payments, your lender will report them to the three major credit bureaus, and that positive history will improve your score.
- Monitor Your Credit Report and Dispute Errors: You should check your credit regularly, not only to track your progress, but also to dispute errors, which may include accounts that aren’t yours or incorrectly reported balances.
- Settle Accounts in Default or Collections: You can offer to settle your debt for less than you owe, but make sure the collections agency agrees the debt is fully paid in writing. While older scoring models still count paid collections against you, scores generated by newer models may improve. You can also negotiate paying a charge in default in exchange for the lender removing the mark on your credit report.
- Pay Off Debt: The more you can reduce your debt balances, the more you’ll improve your credit utilization ratio, which is an important factor in calculating your credit score.
- Utilize Available Tools: If you have no credit, use products like Experian Go, which can help you establish a credit history, and Experian Boost, which gives you credit for on-time utility payments and more.
Conclusion
Searching for a student loan can seem overwhelming if you don’t have a credit history, especially if your parents also have bad credit. Credit issues can be an obstacle, but you shouldn’t give up on getting your degree, because there are options available. Depending on your needs and where your credit stands, you may be able to get a loan with a cosigner, apply for an outcomes-based loan, or participate in an income-share agreement. Make sure you understand the terms of the options available to you so you can make the best choice for your situation.
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Lindsay Frankel
Personal finance expert with 3 years experience specializing in researching, writing, and editing insurance, loans, and credit cards content.
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