Student Loans for Bad Credit

The unemployment rate continues to rise and as a result many people are thinking of returning to school. Of course if this economy has cost you a job then its likely that your credit rating has also suffered as a result. So how can you get a student loan to improve your skills if you have bad credit? The good news is qualifying for student loans is not really dependant upon you having a stellar credit history. Some types of student loans do depend on credit such as the graduate plus loans, but normal student loans are guaranteed by the government so lenders are a lot more lenient on the terms of the student loans.

Types of Student Loans for Bad Credit:

Federal Stafford Loans are student loans that must be repaid and are available to both undergraduate and graduate students. There are two types: Federal Direct Loan (Direct Loan) and Federal Family Education Loan (FFEL).

• If it is a subsidized Stafford loan (demonstrated need for the loan), you are not responsible for interest while attending at least half-time and the principle is deferred.
• If it is an unsubsidized Stafford loan (financial need was not demonstrated) the principle is still deferred but you are responsible for paying interest on the loan.

For more information on federal loans go to www.FederalStudentAid.ed.gov/aidinfo.

Federal PLUS Loans are available to parents of dependent undergraduate students who are enrolled at least half-time. The PLUS Loan is also available to graduate and professional degree students. Financial need is not a requirement.

PLUS Loans are unsubsidized: the borrower is responsible for interest that accrues during the life of the loan. Borrowers can request a loan for up to the full cost of attendance minus any other financial aid.

TIP: Graduate and professional students that borrow a PLUS Loan receive an automatic deferment while in school.

 

Federal Perkins Loans are low-interest (5 percent) loans that must be repaid; the maximum annual loan amount is $4,000 for undergraduate students and $6,000 for graduate students.

TIP: You should be sure to find out which financial aid programs described above are available at each school you are interested in attending. Not all schools participate in all of the federal student aid programs.

 

If you have a financial need then you may also qualify for the Pell Grant. The Pell Grant is a grant so its not a student loan and never has to be paid back. The stimulus package has put a lot more money into the Pell Grant program so you may qualify for it if you income has been reduced. This is good if you have bad credit as you won’t be adding any new debt onto your credit score with a grant. There are other government grants you may qualify for to go back to school if you do a little searching.

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