Let’s face it: College is expensive. In 2020, the average student pays nearly $33,000 to attend college — almost double the price tag seen two decades ago. And while public university students owe less than private ones ($25,396 vs. $53,102), both cohorts pay a pretty penny just to further their education.
If you’re preparing to enter college — or just finishing your existing tenure there — you might be wondering how you’ll pay these ever-increasing costs while managing to stay afloat. In many cases, a student loan may be able to help.
Student loans come in both private and federal options. Some require certain credit scores; others do not. Let’s take a look at what you’ll need to qualify for both kinds of assistance.
What credit score do you need to get a private student loan?
These loans come from private lenders and financial institutions and, unlike federal loans, there’s no hard limit to how much you can borrow. This makes them a good option for higher-cost schools and private universities.
If you think private student loans may fit your needs, crunch the numbers in Credible's rate-shopping tools to find the best interest rates and loan terms. Whether you're a student or a cosigner, you can use Credible to find a private student loan lender and ensure you're eligible to borrow.
Additionally, they’re credit score-based. That means if you or your cosigner has great credit, you could qualify for a very low interest rate, which means serious savings over the course of your loan term. With that said, great credit isn’t required to qualify for one of these loans.
“The minimum credit scores vary by lender, but are typically around 620 to 660,” said Mark Kantrowitz, publisher and VP of research at SavingforCollege.com.
If you're confident in your credit score and you've either hit your federal student loan limits or don't qualify for federal loans, then you should consider applying for a private student loan. You can use Credible to compare rates and choose from several repayment loan types — plus, there are no prepayment penalties. The process takes just three minutes.
According to data from the Consumer Financial Protection Bureau, about 17% of private student loans went to borrowers with 580 credit scores or lower in 2018.
Here’s a credit score breakdown, based on that data:
- 580-619 (11% of loans)
- 620-659 (14% of loans)
- 660-719 (24% of loans)
- 720+ (34% of loans)
Good news for students: According to Credible, students who add a cosigner are "3x more likely to qualify for a loan." Get started on your application today!
What credit score do you need to get a federal student loan?
Federal student loans don’t have credit score minimums.
“Most people entering college don’t have established credit histories,” said Amy Lins, senior director of learning and development Money Management International. “The good news is that for most borrowers, there is no credit check or credit history requirement when applying for federal student aid.”
Lins says “most” because on PLUS loans — federal loans designed for graduate students and parents of undergraduate students — there is a credit check involved. Though there’s no minimum credit score requirement, other findings on the credit report could come into play.
As Lins explained: “If a person has an adverse credit history — meaning serious delinquencies, judgments, bankruptcies, or other serious credit issues — they can still get a PLUS loan if they have an endorser — similar to a cosigner — or write a letter to the Department of Education outlining extenuating circumstances that contributed to their adverse credit history.”
Federal loans can be a good way to pay for college if you have little or not-so-great credit, but they do come with limits. For undergraduate students, these range anywhere from $5,500 to $7,500 per year, and on PLUS loans, it’s $12,500 to $20,500 annually.
What if my credit score is too low?
If you’ve exhausted your federal loan limits and you need private loans, your low credit score could hurt you. Fortunately, there are still options.
- Bring in a cosigner
- Improve your credit score
1. Bring in a cosigner
First, you can consider bringing in a cosigner. Cosigners are usually a parent or other adult family member who agrees to share the responsibility of the loan with you. Using a cosigner can have big benefits, particularly if they have a high credit score. It could mean lower interest rates and a lower-cost loan in the long run.
If you go this route, make sure the cosigner knows what they’re signing up for. Cosigners are legally bound to repay the loan just as you are. If you fail to make your payments, it could impact their credit and lead to other financial problems.
To see what you'd pay on a private student loan, either with or without a cosigner, you can visit Credible today to view a rates table that allows you to compare fixed and variable rates from multiple lenders at once with no impact on your credit score.
2. Improve your credit score
You can also work on improving your credit score. Paying down debts, making on-time bill payments, and correcting errors on your credit report can all help. If you don’t have much credit, open up a credit card and use it for a few bills each month. As long as you pay it off by the due date, your credit should see a bump shortly down the road.
What impact do student loans have on my credit score?
When you take out student loans, your credit score may take a hit due to the higher loan balances. It’s not forever, though. Once you graduate and enter the repayment period of your loans, they could actually help your score — at least, if you make your payments on time.
“As long as the borrower is making full, on-time payments, they are actually building their credit history and credit score,” Lins said. “The biggest factor in a credit score is payment history. Showing responsible borrowing habits through on-time payments is the best way to build a positive credit history.”
To make sure you can comfortably make those future payments, use an online student loan calculator before filing your application, and don’t take out more than you need.
If you’re worried about paying for college, there are options. If you opt for private loans, make sure you shop around and compare lenders, as rates and qualifying requirements can vary widely. Visit Credible to get personalized rates from multiple lenders at once — all without hurting your credit score.