Public Versus Private Sources
With one exception, student loan programs administered by the Department of Education do not require credit checks. The exception is the PLUS program which provides loans to family members for the benefit of an eligible student. Private lenders require credit checks as a condition of doing business. The results determine the terms and costs of borrowing, as well as overall limits on the amounts tone, can finance.
Few Lenders Do Not require Credit Checks
There are few lenders that do not ask for credit checks. For example, some charitable and philanthropic organizations that make student loans without credit checks. These are rare and intended to benefit the student without regard to credit worthiness. Some instances are fraternal organizations that keep a revolving loan fund for college students from member families.
Private Lenders Require Credit Checks
Those who cannot use federal loan programs, or whose needs remain after exhausting them, may need to borrow from commercial sources. Banks and other private commercial lenders ask for credit references, and the lenders determine the amount to lend, the rates to charge, and any other terms on the basis of creditworthiness. Credit unions and employer-based sources are among the better candidates for fair lending. These sources have special relationships with the borrower. Many experts advise caution when considering commercial student loans. Some sources work with schools with poor graduation rates and even poorer rates for successfully employed graduates. Some commercial student loan sources have harsh standards and charge high-interest rates with no deferral until graduation and no grace period.
Private Lenders with Cosigner Required
When considering student borrowers, many lenders request additional security in the form of a co-signor. This requirement can help gain access to better rates and higher loan amounts; however, the co-signor must realize that he or she will be liable in the event of a default by the borrower.
No Credit Check? Then Check the Source
Private lenders, which do not ask for credit checks, may not be the actual lenders but persons who are merely attempting to gain access to information. This service can be a helpful, but many experts caution to use care when providing information to any source. Student information and its privacy have been in the news recently in the form of proposed protections for students who put personal information online.
Federal Loans without Credit Checks
The U.S. Department of Education operates loan programs under the organizational label of the William D. Ford Federal Direct Loan (Direct Loan) Program). This program group replaced the Stafford Loan program and included the Perkins Loan Program. The advantages of federal student loans are substantial. They cost less in interest, have flexible repayment terms, are not payable until after completion of a degree program. Repayment of some federal loans can be deferred and forgiven. With the exception of federal and state sponsored student loan programs, one should consider any source claiming to offer loans without a credit check carefully.