How to Qualify for Student Loans, Even If You’re a Parent with Bad Credit

Credit deniedI talk a lot on The Empowered Dollar about avoiding student loan debt. It’s a very personal subject for me, and I regret some of the decisions I made when I took out student loans.

I also know some parents don’t have a choice when it comes to borrowing for their child’s college education, and most families will have to take out some loans to help pay for even a decently priced university.

But if you’re a parent with bad credit, your options for paying for college can feel limiting.

Take a mother’s story like Martha’s, for example (in case you’re wondering, Martha is not her real name). I spoke with Martha a few weeks ago and she was struggling to find student loan options for her daughter given her poor credit history.

Martha’s Story: Martha’s daughter is heading off to college, and to help pay for tuition, Martha applied for a Parent PLUS loan – a college loan from the federal government that parents can take out on behalf of their children to help pay for college. Unfortunately, Martha had recently fallen behind on her credit card payments, which negatively impacted her credit score, and her Parent PLUS loan was denied. Martha’s bad credit also means that her daughter is having trouble applying for student loans on her own, because she needs a reliable co-signer (like a parent) on her loan application.

Martha, like other parents with a not-so-stellar credit history, is in a tough spot.

Unfortunately, if you’re a parent with bad credit like Martha, a Parent PLUS loan is not an option. But bad credit doesn’t mean you shouldn’t apply for a Parent PLUS loan or give up on your loan options.

3 Steps for Getting More Student Loans, Even with Bad Credit

I reached out to Graham Batzler, co-founder of, for his advice to parents on how to qualify for student loans, even with bad credit.

1. Try to Reverse the Decision

“If it’s within about a month or 45 days of the application, she can likely file an appeal to reverse decision with the school,” says Batzler. If it’s beyond the allowed time frame or the college does not allow appeals, then Martha is likely out of options for receiving a parent federal loans. But oddly enough, getting denied for a Parent PLUS loan actually opens up other student loan options for her daughter.

2. Increase Your Stafford Loans

If a parent is denied a Parent PLUS loan, the student becomes eligible for an increased amount in unsubsidized Stafford Loans. According to, students whose parents were denied a PLUS loan are eligible for an extra $4,000 in unsubsidized loans. And good news for credit-impaired parents: the Stafford Loan is not a credit-based loan.

Stafford loans seems like a better option than the Parent PLUS loan, anyways. “Though Stafford loans are in the student’s name, the interest rate is lower,” explains Batzler. “Depending on the school and the situation, Stafford loans have a 6.8 percent interest rate or lower, while PLUS loans are 7.9 percent.” According to Batzler, because of an increase in eligibility for the amount of Stafford Loans a student can take out, some parents actually apply to Parent PLUS to be denied on purpose – just to have their students eligible for the lower interest rate.

3. Turn to Non-Federal Loan Options

Maximizing your federal student loan options first is always smart. If you still don’t have enough money to cover the bill, private loans are the next place to turn. If you’re a parent like Martha, you might have already applied to some private loans, only to discover that your son or daughter needs a reliable, creditworthy cosigner on the loan.

Try approaching your local lenders before taking a loan out from a big bank. “Small banks or credit unions local to your area may be more flexible with interest rates or repayment plans, especially if you’re already a customer or your student is attending a local school,” advises Batzler.

If you’re looking to borrow from a bigger bank or credit union, Batzler warns to look up the financial institution reviews first. Sites like Student Lending Analytics and Cheap Scholar are great resources for scouting out school loan options.

Of course, even after dishing out all of this information about how to qualify for student loans, I have one last piece of advice: try to avoid borrowing for college in the first place.

I hope hearing about one parent’s struggles to qualify for loans is enough to inspire anyone who doesn’t yet have a son or daughter heading off to college to plan ahead. When it comes to paying for college, keep saving, shop around and make sure your child is actively applying for scholarships. But most importantly, start planning now.

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16 Responses to “How to Qualify for Student Loans, Even If You’re a Parent with Bad Credit”

  1. Jai Catalano says:

    I have plenty of years before I have to worry about this. Will it get easier? Hmmm… Let’s wait and see.

  2. I agree with the last part the most! I was very lucky to never have student loans. Thanks for the tips, but hopefully we’ll never have to use them for our kids!

  3. This is why I have a 529 for both kids. I hope to avoid the whole, get loans for my kids thing. I don’t even want to co-sign, if it can be avoided.

  4. Debtgirl says:

    This is going to be me! In five years i will have just finished a bk and my kid will be needing funds for college! Wow, that is going to be a super challenge .

  5. Debtgirl says:

    Can you talk a little more about 529?

  6. Martha says:

    I am the “Martha” in your story, and I found this article incredibly helpful. To those who think it can’t happen to them, you’re incorrect. We saved and such through the years, but unexpected medical nightmares the past three years caused us to dip into everything we’d saved and more leading us into bad credit for the first time in our lives. As our oldest goes off to college this fall, we are now struggling with this very situation and navigating unchartered waters. After reading your article, I feel a little more informed and a little more positive about our options. Not all bad credit is caused by overextended credit spending or unemployment. I know I’m not the only Martha.

  7. Rocio says:

    What if the parent doesn’t have credit because is new. Not bad credit, but starting to build credit.

    • Stephanie Halligan says:

      Hi Rocio – It might be the same situation, unfortunately. But you can start building credit! A secured credit card at a bank or credit union may be a good place to start.

  8. Teodoro Schuttler says:

    This may not be the best place to ask this, but, I’m looking for a debt consolidation company and I have no idea how to locate one… do you have any info on this student debt consolidation company? It’s address is in Sacramento, only 15 minutes from my residence I can’t find comments or reviews on them — US Student Loan Support & Consolidation, 1529 28th St, Sacramento, CA 95816 – (916) 571-9299

    • Stephanie Halligan says:

      I would first reach out to the folks at – they’re a nonprofit that provides one-on-one counseling to student loan borrowers and they might be able to point you in the right direction. Good luck!

  9. Scott Harstad says:

    For most families, the Coverdell Education Savings account is a much better option than a 529 plan. Sure the ESA only allows $2,000 contribution per year, but adds up if you start early enough.


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