Student Loans

 

Bad Credit Student Loans


If you have a short credit history or bad credit, your loan options may be limited. Learn how to make the most of the opportunities available.

Federal Loans (Perkins, Stafford)

Federal student loans like the Stafford and Perkins loans are great for students with good and bad credit. In fact, Stafford and Perkins loans are not credit-based and do not require collateral. Perkins loans and subsidized Stafford loans are need based, however (unsubsidized Stafford loans are not), which may limit your borrowing amount. If you qualify, these loans are your best option. The interest rates are low, repayment schedules are flexible, and deferral/forbearance in times of economic hardship ensures you can keep up with payments.

Alternative Loans

If you do not qualify for federal loans or still need to borrow more, you may choose to borrow from a private lender. Some private lenders specialize in bad credit loans. In general, the interest rate will be higher and there may be additional restrictions. It is important to get advice from your future college’s financial aid officer and shop around for the best deal. See our section on Alternative Loans to learn more.

Qualifying Cosigner

If you are in the position to rely on a friend or relative with good credit you may be able to get a cosigned loan. By cosigning your loan, this person is guaranteeing that the loan will be paid; even if you default, your cosigner will be responsible for the payments.
A cosigned loan may get you a loan with a better rate and terms, but you should also consider the personal ramifications. Are you completely confident in your ability to repay the loan? If not, will your relationship with the cosigner be able to withstand the subsequent turmoil? Although paying for college is important, not everything can be measured in dollars and cents.

Rebuilding Your Credit

If bad credit is keeping you from getting student loans, you may need to put your education on hold until you can rebuild your credit score. Another option is to attend a less expensive school for a few years and then reapply for loans.

There is good news, however. If you manage to get student loans, even with bad credit, repaying them faithfully and responsibly will help rebuild your credit. Hopefully next time you apply for a loan your improved credit score will make the process a breeze!

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