Can You Get Student Loans with Bad Credit?
It is the dream of many to see their kids getting a degree, but with the rising cost of college education, getting a loan is the only way to go. But credit card companies and banks are strict when checking your credit history. For those with a bad credit history, applying for a loan would be hard, but not impossible.
The Pell Grant program is the first choice for many Americans especially those who are financially in trouble. This is not a loan; it’s a form of financial aid given by the government for students in the lower-income groups. In order to apply for a Pell Grant, you must submit a Free Application for Federal Student Aid form or FAFSA. There is a list of criteria that the Department of Education uses to determine who is eligible for the program. If eligible, there is a maximum amount that the government will give you. This amount varies year after year with the latest being $5,550 a year.
The Stafford Loan is another federally-funded loan program for students. Unlike the Pell Grant, the borrower will have to pay back the loan. This is a great option as the federal government won’t be strict with your credit requirements. There are two types of this loan: the Direct Subsidized Loan and the Direct Unsubsidized Loan.
For Direct Subsidized Loans, the federal government will pay the interest rate of the loan for certain periods. During this time, the borrower simply pays the principal. An application for this loan can be made by submitting a FAFSA form. Just like the Pell Grant, only those who are financially in trouble can apply for the loan.
For Direct Unsubsidized Loans, the federal government won’t pay the interest. The borrower pays both the interest and the principal. The Direct Unsubsidized Stafford Loans are available to nearly everyone.
Asides from the availability, there are many other advantages to borrowers of this loan. There is a grace period of six months after you finish college before you start repaying your loans. The repayments plans are very flexible. Many options are laid out so anyone can find a repayment plan that’s suitable to them. It would take most borrowers around one to two decades to repay the loan. If some financial difficulties arise while the loan is being repaid, you can receive a deferment on your loan.
With the Federal Perkins Loan, you can receive up to $5500 a year depending on your financial need. The Perkins Loan is available to both undergraduate and graduate students. This loan has an interest rate of 5% which will only come into effect once repayment begins. There is a nine month grace period after graduation. The Perkins Loan will be given directly to your school which will then either disburse it to the borrower, or use it to pay for the education.
Some private companies will give a loan even if the borrower has a bad credit history. This is not as good an option as getting a federal loan since most companies will slap the borrower with higher interest rates. Some companies have additional fees. The good thing is that most private companies don’t have very strict criteria (asides from your credit history!) unlike the government. Before applying for a private loan, check out their interest rates and repayment options, and compare them with other companies.