Federal Direct Loans
4.99% to 6.54%
Up to $20,500
Up to $25,000
7.99% to 13.99%
$2,001 to $100,000
6.99% to 12.49%
$3,001 to $20,000
4.81% to 12.85%
$2,001 to $20,000
5 to 15 years
2.99% to 12.99%
$1,000 and up
5 to 20 years
Up to $250,000
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
As low as 2.99% fixed
4.99% for undergraduates or 6.54% for graduate students
Varies by lender
Direct subsidized and unsubsidized loans: 1.057% disbursement fee
Direct PLUS loans: 4.228% disbursement fee
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
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
- 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
- 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
- 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.
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.