Getting Loans as a College Student With No Credit (A How-To Guide)

Written by: Kristyn Pilgrim
Updated: 1/20/20

The average cost of college in the United States ranges from close to $20,000 a year for public four-year institutions to nearly $45,000 a year for private nonprofit institutions.

Almost three-quarters of all college graduates leave school with student loan debt. Student loans can help you to pay for college, but can you even get a loan with no credit history.

The answer is yes. There are several options for college students who have no credit history, the most common of which are federal student loans. These loans take into account your financial status, and the federal government ultimately offers loans to students who could not otherwise afford to go to college. 

If you don’t have any credit and want to get a private student loan, you can use a cosigner with a good credit history to help. For federal direct undergraduate loans, borrowers are not required to have a credit history or a co-signer. Alternative student loans, including those offered through colleges and universities directly, as well as private lenders, also offer college student loans based on future earnings instead of credit history. 

Steps for Getting a Student Loan With No Credit

If you are a college student with no credit and need some help paying for school, there are ways to go about getting the help you need.

First, look into any free money options, such as scholarships, grants, and work-study programs that can provide funds for higher education. Considering gift aid doesn’t have to be paid back like loans, these avenues should be explored first. After you have exhausted these options, consider student loans.

Consider the following options, in order, when looking for educational funding:

  1. Scholarships and grants.
  2. Work-study programs.
  3. Federal student loans.
  4. Private student loans, with a cosigner.
  5. Alternative student loans through your college or university.
  6. Private loans through financial institutions.

Federal Student Loans

Federal student loans offer some of the most favorable loan and repayment terms. They should be the first thing you apply for as a college student seeking a loan after all scholarship and grant opportunities are exhausted. To apply, you will need to fill out the Free Application for Federal Student Aid (FAFSA). 

The FAFSA will calculate your expected family contribution (EFC) and then subtract it from your total cost of attendance (COA) to find out what types of federal financial aid you qualify for. There are two main types of federal student loans disbursed by the U.S. Department of Education: subsidized loans and unsubsidized loans.

Direct Subsidized Loans

  • Open to undergraduate students with financial need
  • No payments needed while in school at least half-time and during your grace period
  • Flexible repayment options
  • Fixed interest rates
  • Interest rates are covered. Interest does not accrue until after your grace period ends (typically six months post-graduation) or until you drop below half-time status.

Direct Unsubsidized Loans

  • Open to undergraduate and graduate students
  • No requirement to show financial need
  • Flexible repayment options
  • Fixed interest rates
  • You are responsible for the interest during all of your loan term

It is free to submit your FAFSA and can be easily completed online. To apply for a federal student loan, simply submit all the required information before the deadlines.

Alternative Student Loans for Students With No Credit

Private loans through financial institutions can be harder to get with a limited credit history. These loans can have a higher interest rate for people with bad credit or no credit. A personal loan or a loan that looks at things other than credit history can also be an option.

Some alternative student loans will work with college students with no credit, using things such as future earnings as collateral. These types of loans are often offered through universities and colleges directly. Each lender will have their own set of terms and conditions and methods for applying.

Using a Cosigner

Private student loans can have high or variable interest rates, and they often won’t lend to people who they consider to be high-risk borrowers.

If you have bad credit or no credit history, you are a high-risk borrower. Lenders may shy away from you altogether.

One of your options is to ask someone you trust, and more importantly, someone who trusts you to cosign on a loan. This is a big ask, as it will make them financially responsible for the loan if you are delinquent or fall into default. 

A cosigner will need to be creditworthy and have a good to excellent credit rating to help you get the best interest rates and loan terms. You will need to make your monthly payments on time to protect their credit while building your own. 

When you use a cosigner, their credit rating and income will be considered as well as yours, which can improve your chances of getting a private student loan.

Due to the risk involved to the cosigner, it can be difficult to find someone willing to take on this responsibility. A student loan is a long-term commitment, so cosigners are often family members who are more willing to take the risk on your behalf.

Start Building Credit

If done correctly, a student loan can help build your credit score and boost your overall credit report.

  • Pay on time. Be sure to make your loan payments on time every month to positively impact your credit history.
  • Opt for federal loans first. If you have no credit as a college student, look to federal student loans first. Private student loans have higher interest rates and often won’t lend to students with no credit without a cosigner.
  • Look for loans that have an “out” for your cosigner. If you use a cosigner, you are putting them on the line financially, too. Some loans give you the option of dropping your cosigner after a certain number of consecutive and on-time payments. Look for this feature when you choose your loan.
  • Build your credit. If you are struggling to get loans because you don’t have credit, work on building your credit score. Consider getting a student credit card. These are often offered to students without requiring a credit check, although they will need some proof of income. 
  • Keep credit card balances low. If you do get a student credit card, keep your balance low. Only borrow what you need, and try to pay it off in full each month. If you have kept your balance below 30% of what you can borrow, after about six months of consistent on-time monthly payments, you will have at least a slim credit file.

When looking to start from scratch with your credit and you need a student loan, start with federal student loans that have the best rates first. Once you have fully exhausted these options, consider other types of loans.