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Student Loans & Bad Credit – What Can You Do?
One of the chief concerns of students seeking financing for going to college is that their bad credit record will hurt their chances of succeeding.
Of course, it is easiest of all to find student loans with great interest rates if the student’s credit score is kept spiffy clean, but bad credit needn’t stop anyone from getting the student loan they have been searching for.
One well-known example is the Stafford loan, which assumes that most applicants will be going to college straight from high school, and so they will not have a credit rating yet. As they always say, no credit is good credit. So Stafford loans do not even consider the credit rating a factor when it comes to the qualifications. The same holds true for a Perkins loan, which is a federal loan designated for the students with the greatest need. The only case where bad credit would interfere with this kind of student loan is if you have defaulted on a federally-granted loan for students in the past.
If the student’s credit is irreparable, but the parents of the student have better credit, another kind of loan is available as well. PLUS loans allow the parents to lend their good credit rating to their offspring, and it is actually granted to parents and not to the student. Since the US Department of Education’s student loan programs assume that the parents will pay for a certain amount of their children’s schooling anyway, PLUS loans are intended to cover the amount that the parent would be obligated to contribute toward college costs. Here’s another article on fixing bad credit.
Federal funding is usually always the best choice for a bad credit student loan because the government has an interest in seeing their economy remain stable from one generation to the next. But those who are unable to secure a US Department of Education student loan may need to turn to the higher-stakes world of private loans instead. This is an especially viable option in the case where the student is planning to graduate in a field with a high earnings potential, like law or medicine.
Nobody is limited to picking just one of these options, of course. The resourceful student might be able to put together enough money to finance college through a combination of any of these financial programs. Even if a student’s bad credit score leaves no option but to pay a very high interest rate, that’s still not a place to give up. Many student loans have an option to defer payments until after the student has finished college, which gives them time to improve their credit rating as well as the opportunity to consolidate their student loans at a better rate, lowering their payments to a more affordable level. Here’s somewhere to go to look more closely at credit repair as well.