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Bad Credit? Student Loan Options

Receiving a college education may be the single most important accomplishment that one may achieve in their entire life time.

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If your credit is bad then you have had previous debt and enough time to mismanage it. So now you want to go to college and don’t know how you’re going to get a student loan, right?

Even if your credit is bad you still can afford going to college. It’s simple; here are the student loan options that have nothing to do with your existing credit. You’ll find Federal Stafford Loans, Perkins Loans, other non-credit based government loans, as well as Pell Grants and various types of scholarships and grants.

But guess what? Don’t necessarily discount yourself from credit-based loans, either. Find out why using a co-borrower just may get you the funds you need and help you repair your credit at the same time.

Stafford Loans

The federal Stafford Loan comes in two types – subsidized and unsubsidized. Both of these are relevant to all students, even those with bad credit or no credit. The truth is, credit doesn’t matter with the Stafford loan. This is hands down the most popular, most widely disbursed student loan for undergraduates and graduate level students.

  • The subsidized Stafford Loan is awarded to financially needy students. If you qualify, the federal government pays the loan interest due every month while you’re in school and for the six-month grace period between graduation and repayment.
  • The unsubsidized Stafford Loan is available to every student, regardless of need. However, if you are depending solely on the Stafford Loan because of your credit, the loan awards are often meager. This is why so many college students carry multiple student loans, some of them credit-based alternative loans – so they can cover the costs of auxiliary college expenses. And this is where future credit problems often begin to germinate.

Another advantage to the Stafford Loan: you can reapply every school year.

Think Stafford Loans could be your solution? Find out more about subsidized Stafford Loans and unsubsidized Stafford Loans.

Perkins Loans

Good news: the federal Perkins Loan is another solution for poor credit borrowers. Far fewer Perkins Loans are disbursed in comparison to the very popular Staffords and Perkins only those go to the most exceptionally disadvantaged. Still, here’s another government subsidized student loan that requires no credit check. Perkins loans are available for both undergraduate and graduate students. Typical loan awards are between $1,000 and $4,000 for each school year, not to exceed $20,000 total.


Alternative Non-Credit Based Loans

If you are lucky enough to be pursuing a degree in one of the health science fields, such as medicine or nursing, there are student loans specifically designed for health science students that are completely credit-free:

  • Loans for Disadvantaged Students
  • Nursing Student Loan Program
  • Primary Care Loan Program

Loans for Disadvantaged Students

The Department of Health and Human Services sponsors the Loans for Disadvantaged Students program, a low-interest, non-credit based loan, available to socially and/or financially disadvantaged students seeking degrees in approved areas of the health sciences profession. You are required to apply for the Loans for Disadvantaged Students program through the financial aid office of the participating school. They in turn choose the recipients and disburse the loans.

Loan Consolidation: Control Over Your Debt

If you already have poor credit, the last thing you need is more of the same. Loans that allow you to consolidate your student loans are commonplace and encouraged by most lenders. In the event you are strapped for funds when loan repayment rolls around, you should apply for the federal loan consolidation. The federal Loan Consolidation program allows you to roll all of your federal student loans into one, low monthly payment. In some cases you may cut your monthly student loan debt by 50%. And there is no credit check to consolidate with the federal loan. However, you will notice that your loan repayment period is extended in order to offer such a low monthly payment.

When You Must Apply for a Credit-Based Loan

What if your federal loan awards were too lean to pay all of your college expenses and what if you really needed to consider a credit-based private student loan with your bad credit?

There is one strategy that could work: first borrow from a student loan lender, a company that specifically manages student loan and debt, they have scores of loans to fit almost any situation and many offer debt-counseling services. Second, before you apply find someone—a family member or friend—with good credit who would be willing to sign a promissory note as your co-signor or co-borrower. Essentially a co-borrower with good credit agrees to legally vouch for you. This strategy may work; you may qualify for all or part of what you need to cover your school expenses.

If you are able to borrow with a co-signor choose a loan product that features a co-signor release. What is this? Once you enter loan repayment you may be eligible to take over the full responsibility of the loan after you’ve made so many consecutive on-time payments. Quite literally your loan co-signor is dropped from the loan. This is to your advantage, here’s why: consider this a valuable opportunity to be financially responsible. Build or repair your credit when you continue to make full, on-time loan payments.

Repairing Credit with the Help of Student Lenders

Credit counseling is available through many student loan providers, such as Sallie Mae and similar corporations. While these companies are for-profit businesses, they nevertheless have a mission to make higher education possible.

Tip: If student loan providers consistently deny you loans most will also work with you to help you repair your credit.

As you can see options do exist for students with bad credit.