Best Student Loans for Low-Income Families

College can increase annual and lifetime earnings, but covering tuition and living expenses can be a challenge for low-income students.

If your family needs help covering college costs, start by submitting the Free Application for Federal Student Aid (FAFSA). It can help you qualify for need-based aid, including grants, work-study and federal student loans. If that doesn’t cover the full cost, private student loans may help fill the gap, but they typically come with higher interest rates if you have a lower income.

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Can you get student loans with a low income? 

Low-income students can access federal and private student loans to pay for college.

Federal loans come from the Department of Education, and most don’t require a credit check or minimum income. Some federal loans are awarded based on financial need, while others are available to all students regardless of income.

“Federal student loans are low-income borrowers’ best funding option because eligibility is not tied to credit history, they come with fixed interest rates, and they unlock access to essential safety nets, such as income-driven repayment and deferment options,” says Bethany Hubert, college lending and financial aid specialist at Earnest.

Private student loans are generally harder to qualify for with a low income. Many lenders consider your income, credit history, and debt-to-income ratio when deciding whether to approve you. If you have a lower income or poor credit history, you may need a cosigner with strong credit to qualify or get a lower interest rate.
 

Federal aid for low-income borrowers

While some types of federal aid are open to all students, there are certain options specifically designed to help low-income students. Here are some specific types of federal aid designed for students with limited means.

• Direct Subsidized Loans: These loans are available to undergraduate students with financial need. They don't accrue interest while you’re in school, so you graduate with a lower loan balance than you would with an unsubsidized loan.
• Pell Grants: The federal government awards these grants to undergraduate students who have exceptional financial need. These grants don’t have to be repaid, and you can receive one for each year that you’re in school (up to six years).
• Federal Work Study: Both undergraduate and graduate students with financial need may qualify for work study, which provides part-time employment to help them earn extra money for school. Work study income doesn’t have to be repaid, but does have to be earned through employment.
• Federal Supplemental Educational Opportunity Grant (FSEOG): This program offers grants to undergraduate students with exceptional financial need. Grants are administered by the financial aid offices at each participating school.
• Income-driven repayment: Once you graduate, you can sign up for an income-driven repayment plan, which adjusts your monthly loan payments based on your income. Your payments will be limited to a certain percentage of your discretionary income. Very low-income borrowers could pay as little as $0 per month.

Private student loans for low-income students

Private student loans may help fill the gap if grants, scholarships and federal student loans don’t cover your full cost of attendance.

However, a low income can make it more difficult to qualify for private loans. Most lenders check your credit and income to decide whether to approve you and what interest rate to offer. If you don’t meet a lender’s requirements on your own, you may need to apply with a cosigner who has strong credit and steady income.

Private loans can be a useful supplement to federal aid, but it’s important to borrow carefully. Taking on too much debt can make repayment harder after graduation.

“A helpful guideline is to borrow less in total than what you expect to earn in your first year after graduation,” says Angela Colatriano, chief operating officer of College Ave. “By doing so, you can typically be on track to pay off your loans in around 10 years.”

How to qualify for financial aid as a low-income student

The first step to qualifying for any federal financial aid is to complete the Free Application for Federal Student Aid (FAFSA). You’ll have to submit this for each academic year. The FAFSA requires you to provide basic income and asset information about your family. You'll also need to authorize access to your tax records.

Income limits for each need-based aid program vary, and the information you provide in your FAFSA will determine your eligibility.

Your eligibility will also vary depending on your dependency status. Most students under age 24 are considered dependent students unless there are extenuating circumstances. However, if you do qualify as an independent student, you should qualify for even more federal aid.

Additional resources for low-income students

In addition to federal financial aid and private loans, there are plenty of other resources you can use to pay for school if you’re living on a low income. 

“Low-income students should aggressively apply for external scholarships and grants from nonprofits, local organizations, and their colleges, especially departmental or program-specific awards, which often have less competition than national scholarships,” says Hubert.

Many scholarships are merit-based, but grants are often need-based, meaning you may have an easier time qualifying with a low income. Start researching your options as early as possible to give yourself plenty of time to apply.

Finally, if you want to minimize the amount of loans you’re taking out but don’t qualify for enough scholarships and grants to cover your costs, consider attending school part-time so you can work. You could also opt for a more affordable community college, especially in the first couple of years of schooling.