Obtaining a student loan with bad credit is a genuine obstacle to getting a college education. The cost of getting a university education has risen in recent years which means that most students have little alternative but to borrow money to fund their academic training.
Student Loans With Bad Credit
Individuals who wish to attend university can either opt for a government loan or borrow money from a financial institution. Federal student loans are normally more affordable and sometimes offer students the opportunity to take advantage of student loan forgiveness programs after graduation. There may also be private loans available from the banks at a higher rate of interest, although a co-signer is likely to prove essential.
Federal Student Loans
Subject to a borrowing limit, no credit check student loans are available from the government to fund the cost of a college education (living costs and tuition fees). Federal Family Education Loans (FFEL) offer a more favorable rate of interest than their private sector equivalent. However, there is a limit to how much can be borrowed, which may mean that they aren't sufficient to cover all associated academic costs.
Perkins Loans
Whilst Perkins loans are cheaper due to government subsidization, they also employ a strict means test. An application will need to be made through the schools financial aid office. At 5% (subject to change), they are the most affordable bad credit student loan available. Sadly, only a small percentage of applicants will qualify due to the means test, but it is worth checking for eligibility.
Stafford Loans
Depending on the borrower's financial circumstances, this no credit check student loan could either be subsidized or unsubsidized. It is a fixed-rate loan at 6.8% (subject to change). They are by far the most common source of borrowing, although the amount that can be borrowed each year is limited. This leads many students to seek an additional loan from the private banking sector.
Private Sector Student Loans With Bad Credit
It is possible to get a bad credit student loan from a financial institution, although they have introduced stricter criteria due to the escalating student loan default rate. Candidates should approach lenders, such as Chase and Fannie Mae, on an individual basis in order to explain their personal situation to the lender. It is important to take into account the fact that any offers will be at a higher rate of interest.
Co-Signer Bad Credit Student Loans
If a student loan with bad credit is difficult to obtain from a bank, a parent with a good credit history could co-sign for a loan. Financial institutions have tightened eligibility criteria considerably in recent years so having a co-signer will dramatically increase the likelihood of approval. It is sometimes possible to release the co-signer upon completion of a fixed number of payments following course completion.
Getting approval for a student loan with bad credit isn't an easy exercise. Those considering attending college should look closely at federal student loans, unless they have access to a co-signer with a good credit history. Check the banks policy on releasing the co-signer after graduation.
Readers who found this article helpful may also be interested in reading more about how to choose a student loan.
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