Non credit based student loans are designed for those who haven't established a credit history or have missed debt repayments. Whilst borrowing privately from a bank will be difficult to get without a cosigner, there are student loans with no credit history available from the federal government.
Non Credit Based Student Loans
Many individuals who attend university have never borrowed money before. Whilst this may not seem like such a bad thing, it will be interpreted negatively by the bank. This is because financial institutions haven't the ability to assess the credit worthiness of that individual.
Banks will not offer no credit student loans because of the risk of lending someone a large sum of money. Those who wish to take out a private loan from a bank should try to sensibly establish a reliable repayment history by finding the best credit card deal. Remember to always settle the balance in-full each month.
Bad Credit Student Loans
A poor credit history is caused by failing to keep-up with the repayments on credit agreements. Given that these credit misdemeanors show on credit reports for a period of 7 years, cosigned bad credit student loans and no credit check student loans from the federal government are the only way to borrow money.
No Credit Check Student Loans
Perkins loans: With an interest rate fixed at just 5% (subject to change), this is the most affordable way to borrow money. Those who enter certain professions, such as nursing, teaching or the armed forces, can enjoy debt forgiveness of up to 100% of the loan. However, those who intend to apply for a federal Perkins loan will need to pass a means test as they are only available for those who have or come from a low income family. Applications should be made directly to the school itself. The financial aid administrator is vested with sufficient power to decide how much money is offered to each applicant.
Stafford loans: This is by far the most popular borrowing method. Non credit based student loans are available on either a subsidized or unsubsidized basis. Not surprisingly, there is a means test for the subsidized loan. The applicant is able to borrow up to $65,500 for either graduate or professional studies. Repayments will commence six months after the student graduates. The term of the loan is normally 10 years, although this can be either shortened or extended.
Non credit based student loans are only available from the federal government due to the risk of default. Individuals who are likely to need to borrow additional money should try to establish their credit worthiness through a credit card deal a minimum of 6 months before applying for a student loan.
Sources
"Federal Perkins Loan programs." U.S. Department of Education.
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