Both private and federal lenders require that parent borrowers undergo a credit check when applying for student loans. Parent borrowers with poor credit still have options, but typically, it’s best to start with their child maxing out any subsidized and unsubsidized loans offered to them before pursuing private student loans.
After fully exploring those routes, you can look into student loan options you may qualify for as a parent.
Here’s what to know about student loans for parents with bad credit.
- Consider a federal parent PLUS loan
- Private student loans for parents with bad credit
- What credit score do I need for bad credit student loans?
- Steps to consider if your student loan application was denied
- Alternatives to student loans for parents with bad credit
Consider a federal parent PLUS loan
Parents who want to take on student loans to help their child pay for college can start their search with federal parent PLUS loans, as federal student loans generally have much lower interest rates than private student loans.
To qualify for a parent PLUS loan, having a high credit score isn’t a requirement, but the applicant can’t have any adverse credit issues on their report. Such issues might mean having to submit documentation proving extenuating circumstances, going through PLUS Credit Counseling, or applying with a cosigner.
The good news here is that having a lower credit score won’t impact the interest rate you’re offered with a parent PLUS loan, as all borrowers receive the same interest rate.
To apply for a federal parent PLUS loan, applicants must take the following simple steps:
- Lift any security freezes on your credit file. Your application can’t be processed if there is a freeze on your file. You can unfreeze your credit report with the three consumer credit bureaus— Experian, TransUnion, and Equifax— online in your accounts, over the phone, or by mailing appropriate request forms.
- Prepare to apply. You’ll need to provide your (the parent’s) verified FSA ID, your desired loan amount, your child’s student information, your child’s school name, your personal information, and your employer’s information.Â
- Fill out the William D. Ford Federal Direct Loan Program application. The application must be completed in a single session and usually takes less than 20 minutes.
Private student loans for parents with bad credit
Once parents and students exhaust their federal student loan options, parents can apply for private student loans. This is commonly done if their federal student loan options won’t cover the full cost of sending their child to college.
To apply for private student loans for parents with bad credit, you can take the following steps:
- Check your credit report and scores. Parents need to understand where they stand credit wise and how this can affect their credit options. They can request a free copy of their credit report from each of the three consumer credit bureaus through AnnualCreditReport.com.
- Shop around. When you have a lower credit score, it can take more work to find the right lender. Take your time to search for a lender who will work with a borrower with bad credit. Credible lets you compare private student loan rates from multiple lenders, all in one place.
- Prequalify. To avoid triggering a hard credit inquiry, prequalify with a handful of lenders to get an idea of which ones will work with you and what potential interest rate and loan amount they may offer you.
- Submit your application. Once you apply, you can compare rates and terms to see which lender can offer the best deal.
The following table outlines a few potential Credible partner lenders that parents can work with:
| Lender | Minimum credit score | Maximum loan amount | Fixed APR | Variable APR |
|---|---|---|---|---|
| Ascent | N/A | $200,000 | 9.83% – 16.43% | 9.05% – 15.32% |
| Mefa | 670 | Up to school’s cost of attendance | 4.89%+ | N/A |
| INvestED | 670 | $250,000 | 4.37%+ | 5.86%+ |
These are some non-partner lenders you can learn more about:
| Lender | Minimum credit score | Maximum loan amount | Fixed APR | Variable APR |
|---|---|---|---|---|
| PNC Bank | N/A | N/A | 4.49%-12.24% | 5.14%-12.89% |
| Discover Student Loans | N/A | Up to school’s cost of attendance | 5.49%-14.99% | 5.87%-15.12% |
What credit score do I need for bad credit student loans?
While all lenders have their own unique credit score requirements, generally, you need a credit score of 670 or higher to qualify for a private student loan. If you do qualify for a student loan with a lower credit score, you can end up paying a higher interest rate in order to borrow money for your child’s education.
To improve your odds of qualifying for a student loan and receiving a more favorable interest rate, let’s look at how you can improve your credit score and how adding a cosigner to a loan works.
How can I improve my credit for better approval odds?
If you have time before you need to apply for a student loan as a parent, you can take steps to boost your credit score. You might improve your odds of qualifying for a loan better and to hopefully receive a lower interest rate.
| Tip: One of the best ways is to make on-time payments to all sources of debt. This packs a double punch because having a history of on-time payments helps improve your score and also lowers your credit utilization ratio by paying off more of your debt. |
Should I add a cosigner to my student loan?
Adding a cosigner to your loan — one who has a good credit score — makes qualifying for a loan easier because the lender knows someone with a good credit history is on the loan, too. The lender feels more confident that the loan will be paid back.
Usually, people add a parent as a cosigner. So, in the case of parent loans, the grandparent of the student may be acting as the cosigner.
Steps to consider if your student loan application was denied
If your application for a parent PLUS loan was denied, you can take the following steps:
- Apply for Direct Unsubsidized Loans. Dependent students could get approved for a higher amount of unsubsidized loans (which don’t require a credit check) if the parent is turned down for federal PLUS loans. Explore applying for Direct Unsubsidized Loans before turning to private ones to possibly access these opportunities.
- Appeal if you have extenuating circumstances. It’s possible to file an appeal, but doing so requires completing PLUS Credit Counseling. You can file an appeal if: you believe an error was made, you need to provide missing information, or some of your application info is out of date. You’ll need to provide supporting documentation when you submit an appeal.
- Consider applying with an endorser. When you fail to qualify for a parent PLUS loan due to adverse credit history, you can apply with an endorser who acts as a cosigner, which can make your application stronger. Parents can’t request their endorser be the student they’re borrowing for.
Alternatives to student loans for parents with bad credit
If a parent is struggling to qualify for student loans, here are some alternative options.
Boost your credit score
Parents can work to improve their credit score. They can start by paying off debt to improve their history of on-time payments and to lower their credit utilization ratio. One fast way to improve your credit score is to review your credit report for mistakes.
If you find a mistake on your credit report, it could be harming your credit score. You have the option to report the mistake to the credit bureau (or bureaus) who issued a credit report with an error on it. The credit bureau could investigate the claim and if they find you’re right about the error, they can remove it from your report.
Help your child apply for student loans
Parents don’t have to be fully responsible for borrowing; they can assist their child in applying for student loans of which the student will take ownership. Students can apply for a handful of different federal student loans, including Direct Subsidized Loans, Direct Unsubsidized Loans, and Direct PLUS Loans.
Parents can use this as a learning opportunity to teach their children about credit principles, how interest works, and what taking on debt means.
Research grants and scholarship opportunities
Scholarships and grants are a great way to pay for college without having to borrow money. Students don’t have to pay back gift aid, so it’s a good idea to help them research scholarships and grant opportunities on a local and national level.
Completing the FAFSA also helps students learn what grants and scholarships they might qualify for without having to possibly complete multiple applications.Â