Student Loans With Bad Credit?

by Judge Josh on July 26, 2010

Every time I get a note from someone like Frances, I’m assured that this site will be in business for a long time.

Unfortunately for Frances and the millions like her out there, the process of getting financial aid dollars is difficult to navigate and it seems there’s no good one-stop source for answers to all those complicated questions (although I’m trying to make this site into that source).

No need to go askin' these guys for money just yet.

Anyhow, so you get a student like Frances, who thinks she has no way to pay for college, when in fact it seems like she still has lots of resources at her disposal.

So for the past two years, I attended a private university, and had decided to transfer to a state school because the cost of attendance is a lot less and it is much closer to home.

Smart move if money is an issue.

I am a theater major, and really value and take my training seriously. Right now, I am facing that great possibility of not being able to finance my education.

I hope that’s not the case, but let’s see what we can do about it. You didn’t include any specific information about the costs of your new state school, so I’ll wing it here with some standard info about student loans and how they work.

I am considered a dependent to my family and have no credit to my name, therefore I cannot apply for a loan without a cosigner.

A private loan, that is. The most common types of student loans are Stafford Loans and Perkins Loans , neither of which use your credit history to determine your eligibility, and you don’t need a cosigner.


If you’re a junior or a senior and you’re a dependent student, you have $7,500 available per year just in Stafford Loans — $5,500 in subsidized and another $2,000 in unsubsidized. Hopefully that’ll at least get you started off in the right direction.

According to the FASFA, we have not qualified to receive grants, work-study or much financial assistance because of my family’s income.

Yes, you have to be pretty low-income in order to get a Pell Grant or an FSEOG grant.

However, due to some extenuating circumstances, we currently have a bad credit score.

The key issue here is HOW bad the credit score is. The feds require your parents not to have what’s called an “adverse” credit history — basically you’ve got to be in foreclosure, bankruptcy, tax trouble with the government, or other serious financial straits to get denied a PLUS loan.

So if you aren’t sure, apply for the PLUS Loans and see if you can get them. There’s a good chance that, even with very imperfect credit, your folks may still be able to get a PLUS Loan for you (if they choose, of course).

My parents are also still paying for their student loans, and right now any extra money we have is going towards our basic needs. There are also no close family members that are financially stable. I have also applied to some external scholarships, and currently haven’t won anything. And since I am a transfer student, by the time I got my acceptance to the university, it was past the due date for the university scholarships.

I have not been able to find a job, so i am currently unemployed. We already have been rejected to some private loan companies, therefore at the moment I do not have any means to finance my education.

The rejection from the private loan companies make more sense, since those loans are just like any regular loan that’s NOT from the government for school: they’re heavily dependent on your credit score. In a situation like you described, private lenders are going to the be the least likely to give you any money.

I don’t know if there are any options available to me or what I can do to be able to attend school.

Well, there are quite a few left, I think. I’ll skip any talk of scholarships here, since it’s probably obvious that everyone’s preferred way of paying for college is to win scholarships.

In case that doesn’t pan out, though, definitely consider the tried-and-true Stafford, Perkins and PLUS Loans I’ve mentioned above. The first two, and perhaps the PLUS, too, should be available to you regardless of your credit or current financial issues.

Hope this helps. Anyone else got any thoughts for Frances about scrimping through school when resources are tight? Let us know in the comments below.

{ 8 comments… read them below or add one }

Scott July 26, 2010 at 2:10 pm

Very good advice! Here is an interesting article on the colleges whose graduates earn the most money:

http://helpsavemydollars.com/2010/07/college-graduates-who-earn-the-most-money/

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Allie July 26, 2010 at 3:21 pm

I’m glad you mentioned Perkins loans. I was curious if they’d be on the list when I got about half way through the post. Since she’s a theatre major, I’m wondering about dramaturg work. As a math major, I was asked to do some dramaturg work during school plays (mostly as a presenter of the history of the play to the audience). Since it’s actually within her major, she could talk to the drama people about it (or whomever coordinates these events). Offer to do the first one free and ask for $50-100 for each one thereafter. And be prepared to help put out and clean up snacks and the like, since it helps them appreciate your work ethic and gives them incentive to contract you to do it again. Also, once you’ve done a couple of them and have a reference for this type of work, contact community theatres to try to get this same kind of work (though I have no idea what they pay outside of a school setting).

Lastly, since this comment is more about money and less about how to get loans, I really recommend going carefully through the budget and seeing what can be cut. Cable, internet (libraries have free internet, as do Starbucks now and even some laundromats), reducing cell phone plans, canceling land-lines, etc. Be brutal. It gets easier to live without the luxuries we’re accustomed to once you’ve done it for a little bit. Also, drastic reductions to the food budget are really helpful (this summer I’ve been on a $10/week food budget which has saved me tons of cash – you can read about it and the food I’ve been cooking on this budget in my blog). Lastly, look around for blogs that focus on “college on the cheap,” or at least have the inclusion of it on their blog. An example of this is http://www.cheaplander.com/. I’m sure there are plenty of others.

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Brianna July 26, 2010 at 4:07 pm

My parents have bad but not horrible credit and we have been denied the PLUS loan two years in a row. We even got denied when we went through the “appeal my credit decision” process. Don’t get your hopes up just yet.

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Marie July 26, 2010 at 4:46 pm

I don’t know about PLUS or Perkins, but do try the stafford loans, subsidized and unsubsidized. Those are much easier to get. And, dont give up!

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V July 26, 2010 at 9:23 pm

But what can you do when you have already maxed out government loans but still need more money? You cannot get a private one because your parent has bad credit, you have no credit, and there is no one else to co-sign. Scholarships would not be possible because deadlines are past and the tuition bill is coming up. What can you possibly do in this situation?

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Brittany July 26, 2010 at 11:01 pm

I’m in a similar boat… sorta.

I’m in the process of transferring to a university from a community college (where I was lucky enough to attend with all tuition gifted by the state! Gotta love California’s BOGG waiver!). I am financing my university education almost solely on Stafford loans & merit/essay scholarships because my credit varies between poor and non-existent, and because I have no parents to be considered by the FAFSA (since I’m an independent student, which is another explanation within itself).

So – my answer is borrow what you can directly from the school (assuming it’s offered), and apply for all scholarships possible! Best of luck to you! =)

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Chris July 27, 2010 at 12:00 am

If your parents apply for a PLUS loan and are denied, you can have your Stafford loan increased to $12,500 ($5,500 subsidized and $7,000 unsubsidized). This will go a long way toward covering your total costs at many state schools.

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Chayse July 27, 2010 at 10:41 am

I was in the same situation this year but got some helpful hints from my cousin who had already gone through this. If your parents credit is bad and they don’t qualify for the PLUS loan you should still have them apply for it. Their denial will be sent to your school and they will send you a new financial aid package. The student loans will be increased and I was able to use that amount to pay for my expenses. If it’s still not enough after that I’d try the Stafford or Perkins loans. Where there’s a will there’s a way.

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