Bad Credit Student Loans
The poor economy has many people in a bind. There’s a lot of value in going back to school because additional education often increases employment options. But job lay-offs and impossible mortgages can damage personal credit scores, leaving students unable to qualify for loans. Don’t give up on your dream! There are bad credit student loans for adult learners trying to improve their lives with education.
Federal Government: First Place to Find Bad Credit Student Loans
The U.S. Department of Education financial aid program offers low-interest-rate student loans that don’t require credit checks to qualify.
Federal Stafford Loans and Federal Perkins Loans: No Credit Check Required
The first bad credit student loan you should apply for is the federal Stafford loan. It doesn’t require a credit check to apply, offers a number of federal benefits and is available to a wide range of students.
Stafford loans can be either subsidized or unsubsidized. The Education Department will pay the interest on your subsidized Stafford loan while you’re in school and for the first six months after you leave school. Your financial aid application must prove that you have financial need in order to qualify for a subsidized Stafford Loan, but if you don’t qualify for the subsidized Stafford loan, you can still apply for the unsubsidized loan.
Another excellent resource for bad credit student loans is the Perkins Loan. Perkins loans do not require a credit check, although the eligibility restrictions are a little tighter. Federal Perkins loans are reserved for students with exceptional financial need who are applying to on-campus education programs.
FFELP and FDLP
Stafford loans and Perkins loans, both good choices for bad credit student loans, are administered through two programs, the FFEL Program (Federal Family Education Loan Program) and the Direct Lending Program (FDLP, or William D. Ford Federal Direct Loan Program).
FFELP loans are obtained from banks, credit unions, and education finance companies that have received subsidies from the Department of Education in order to offer students lower interest rates and fees. Your school may recommend preferred lenders, but you’re not obligated to use any of them. You can apply to any financial institution that participates in the FFELP.
Direct Lending Program loans are essentially the same as FFELP loans except that the money you’re borrowing will come from the U.S. Department of Education, which certain banks will arrange for you on the Department’s behalf.
The application for all federal loans is the FAFSA, the Free Application for Federal Student Aid. When you submit your FAFSA successfully, you may become eligible for loans and scholarships from your state in addition to federal loans.
If you’re looking for bad credit student loans, federal loans are a good solution:
- You’ll get lower interest rates and fees compared to private loans.
- The federal government will pay your interest payments while you’re in school.
- You may not need to make loan payments while you’re in school.
- You get longer, better repayment terms.
Bad Credit Student Loans from Private Financial Institutions
Qualifying for reputable, manageable private loans is always based on good credit. While you have bad credit, you probably won’t be able to get a private loan unless it has a very high interest rate and a lot of restrictions to make sure you don’t default. Remember that scam artists love a bad economy because it’s so easy to rip off people who feel desperate. Any private loan that seems too good to be true—especially for someone who has bad credit—almost certainly is, especially if it offers a very low interest rate and claims to offer all kinds of easy repayment terms.
Tips for managing a private loan if you have bad credit:
- Carefully read all the small print and make sure they’re not going to double the interest rate on you in 3 months, or something like that. The last thing you want to do is to add more bad credit to the bad credit you already have.
- Ask someone whom you trust (and who trusts you) to be a co-signer on the loan. This will include the both of you signing a promissory note as well. Your co-signer does not have to be a parent or guardian, but he or she must have good credit.
- Once your student loan payments begin, don’t ever miss a payment and make every payment on time.
Paying Off Bad Credit Loans
After you graduate, do everything you can to pay back your bad credit student loan reliably and on time. If you can’t make the payments or if you fall behind, consider a federal government consolidation loan, offered through its direct lending program.