Identification

• The only time when credit or no credit will not affect a financial aid loan is if, as a student, you apply for financial aid via a government loan program such as a federal Stafford or Perkins loan. Credit plays a role in determining eligibility for all other financial aid loans, including a parent or graduate student federal PLUS loan, as well as private financial aid loans available through a bank or education funding organization.
  
  

The Facts

• Credit or no credit affects private financial aid loans to a greater degree than federal PLUS loans. Private financial aid loans require that you both have prior credit and an acceptable credit score. In general, a credit score of about 630 to 650 out of 800 is the minimum score that will qualify you for a private financial aid loan, according to FinAid. In the case of a federal PLUS loan, no credit is acceptable but an adverse credit history, including a bankruptcy, foreclosure or repossession within the past five years, is not. If you do have a credit history, College Aid Services reports that a score of about 625 is a minimum qualifying score.
  
  

Solution

• Adding a cosigner to your loan application can affect a financial aid loan in two ways. Credit or no credit affects not only whether you qualify for many financial aid loans but also the interest rate. If you qualify but have a credit score that results in you paying a high rate of interest, adding a cosigner with good credit can reduce your interest rate, monthly payments and overall cost of the loan. This can mean a difference of about five to six percent in the interest rate and a reduction of up to 20 to 40 percent in monthly payments, according to FinAid. If you have no credit, adding a cosigner can make you eligible for a financial aid loan and is a way to start establishing a credit history.
  
  

Exception

• Whether credit or no credit affects the financial aid loan for which you are applying, an exception can make you ineligible. If you are in default on a current loan or owe money to the federal government, such as for a delinquent tax bill, you will not qualify until you clear the delinquency.