Student Loans Where No Credit Check is Necessary
Your Credit History Affects Lending
If you have no credit established, as is the case with most new borrowers and college-age students, it does not necessarily preclude you from borrowing money toward college. No credit is typically better than bad, but many institutions require co-signers for either situation.
Before we explore credit-based student loans, let's look at what you already have available that requires no credit check at all:
- Federal Stafford Loans, subsidized and unsubsidized
- Federal Perkins Loans
- other government and state-funded loans
- Pell Grant and other government grants
- private grants and scholarships
Federal Loans
The first loan any student should apply for, credit or no credit, is the Stafford Loan. Any financial aid advisor should tell you that. The subsidized Stafford Loan is designed for only the most financially needy students. And the government picks up the tab for interest repayment until the borrower has graduated and assumes normal repayment of the loan.
The unsubsidized Stafford Loan is also a non-credit based loan, but this "flavor" of Stafford loan is open to any type of student regardless of financial need. In the case of the unsubsidized Stafford loan, students are responsible for all interest that accrues.
The challenge with the Stafford loans is that in most cases the amount awarded is meager. For this reason the business of alternative student loans (credit based) has become big business, along with the consolidation loans necessary to keep borrowers from delinquency and default. Read more on Stafford Loans.
The Perkins Loan is awarded to students who prove the greatest financial need and offers annual loans from $1,000 to $4,000 and a nine month grace period following graduation. Awards provided by Perkins Loans are typically a combination of government funds and funds from the college to which you are applying.
Grants and Scholarships Require No Credit Check
The federal Pell Grant has limited uses. Only students who are the neediest receive Pell Grants. However, there are countless other sources for grants and scholarships. These programs require no credit checks. Scholarships are often awarded on merit and grants on need.
Check with your state government's education fund. Many states offer a slew of specialized grants and scholarships you may be eligible for.
Pursuing a special degree such as business or health sciences? Many organizations and professional societies offer valuable grants and scholarships for students who will pursue certain professions. For example, nurses continue to be in short supply and in answer to the impending shortages, the government and private organizations offer nursing students grants, scholarships and student loans, in return in most cases for service in medically underserved areas. The same may be true of students studying to be teachers.
Alternative Loans and Finding a Co-Signer
What if you want to explore options for alternative or private loans? Without a credit check you would need to find a "credit-worthy" co-signer. No reputable lender will just agree to a student loan without first checking into your financial history; so avoid any company that says it would.
A co-signer is someone you trust and who trusts you who is willing to be your responsible co-borrower in the case you default on your student loan. Many students ask parents to co-sign for them. But if the co-signer's credit is no better than your own, don't bother. You want a co-signer who has the best credit you can get. So if Uncle Charlie's credit is better than Dad's then you might approach Uncle Charlie in regards to co-signing your loan. Good credit makes for lower interest rates, because the risk involved in the loan is minimal compared to the same risk associated with a borrower with less than stellar credit.
- Career Training Loan through Sallie Mae - this is a good example of an alternative loan that offers attractive features and is still available for borrowers with no credit or less than perfect credit with a co-signer.
Steering Clear of Bad Credit
Graduate students or adults returning to college in mid-career are more likely to experience bad credit problems. They have had the opportunity to accumulate and mismanage debt. Returning students and graduate students have more options when it comes to qualifying for grant money.
You have avoided the dreaded credit check, but what about the future? Maybe you want to go back to school for a graduate degree in a few years. If your student loan repayments are the slightest bit difficult to manage, you should talk to your lender about consolidating. Federal loan consolidation is available without a credit check to anyone with multiple federal student loans. In some cases you may be able to cut your monthly payment in half, even though the deal will extend the term of repayment.
The same process is available for alternative or private student loans. Lenders do not want to see a borrower default on their student loans. To those ends most student loan providers offer competitive student loan consolidations often without a credit check and bundled with incentives such as low interest rates and no fees.
