It’s basically common knowledge that you have two types of student loans: federal and private. What’s less commonly known is that the only student loans with no credit check are the federal variety. Every private student loan provider is going to check your credit, every time.
A no credit check student loan starts with the FAFSA, which stands for Free Application for Federal Student Aid. FAFSA is also the doorway to many other financial aid programs, but those are topics for another article. The most common next step after you’ve filled out your FAFSA is to get some kind of Stafford loan, the most common subsidized federal student loan. Because you’re dealing with the government’s program here, there will be no credit check. They use other criteria to decide whether you qualify, including factors such as your own income and the income of your parents or other sources of financial support. The government feels strongly enough about education that they’re willing to back loans made to students who have essentially no business borrowing the money.
On the other hand you have private student loans, where there will be a credit check, and if you should happen to qualify you’re likely to borrow much more money than you really need, at higher rates than you would ever want to pay, with no real opportunity for a loan consolidation after you graduate – at least not one that compares to student loan consolidation programs for federal loans.
So, not only is it more appealing to go with no credit check student loans – it’s also the right move financially in the short term and the long term.
I clearly remember sittting in a classroom in college with ten or fifteen other students and a financial aid staffer on the day my first student loan was disbursed. For 30 or 45 minutes he talked to us about how we really should minimize our loan amounts, only borrow what we absolutely need, etc. I remember being a little nervous; I guess that was the goal they were trying to accomplish. I received about $2,500 that day, and true to the financial aid guy’s prediction, I ended up taking about $13,000 more in student loans before I left school a few years later. I guess that’s the risk of student loans with no credit history required.
The reality is student loans rarely require you to have much credit history. Schools and lenders know that the average 18 or 19 year old kid, fresh out of high school, isn’t going to have much of a past as far as credit is concerned. I can’t even remember if they checked my credit when I got my loans. I’m sure they did, but my guess is these schools are running credit checks more to see if you’ve done anything horribly wrong than to see what you’ve done right. As long as you don’t have any major disasters on yoru credit report they’re probably going to give you at least some student loans with no credit.
Your problem will come if you need to borrow a lot more than would be normally available through standard Stafford loan programs offered through universities. If you need to go way above and beyond those amounts, I’d advise taking a step back. Have you heard all the stories on the news about college grads moving back in with mom and dad because the job they get out of school isn’t enough to cover their cost of living and their loan payments?
Nothing seems more ridiculous than a person majoring in something like literature or politicial science and then going deep in debt when they’re only real career aspirations are to work for a non-profit. Some common sense needs to come into play here. Do some research on how much your loan payments will be for a given amount of debt, and then decided whether your expected salary will go as far as you need it to. And by the way, be reasonable about your ‘expected salary.’ It’s better to be conservative when you’re using that estimate to decide how much debt you should take on.
The more I think about it, the more I’m wondering whether student loans with no credit check are a really a good idea.
