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Understanding How to Get Student Loans with Bad Credit

College can be a very expensive undertaking in life, and very few people are able to pay cash for the tuition while they are attending, especially if they are going full time. After all, how can one afford tuition while putting all of his/her concentration on studies? As a result, most people who attend classes at a university have to apply for some sort of financial aid in order to be able to afford it. And this can often be difficult for people with credit that wouldn't normally be good enough to qualify for a loan. But as going to college is a dream for most children and many adults as well, a thing like bad credit shouldn't be enough to deter someone from reaching that goal in life. Fortunately, there are solutions backed by the federal government that can allow people to take out student loans with bad credit.

The U.S. Department of Education makes two types of loans available for students who have bad credit. The Perkins Loan is one of these options, and it is made available through the university, and is partially funded by the Department of Education as well. The way it works is that this agency makes a set amount of money available to the institution, which then decides which students are in most need of the money. The college then combines the funds it receives from the government with funds from its own coffers and makes loans to students who qualify for this combined amount. The interest rate for this type of loan is normally very low, averaging about five percent, and the student repays the money to the school and not the USDE. As these loans are more based upon financial need rather than the student's credit score, someone with bad credit can still qualify for a Perkins Loan.

Stafford Loans are a bit different than Perkins loans, as they are available in two forms: subsidized and unsubsidized. With subsidized Stafford loans, the borrower is not responsible for paying the interest on the loan while he/she is still enrolled full time at the college. It is not deferred; it is actually paid by someone else - in most cases the federal government. When an unsubsidized Stafford loan is taken out, the borrower is responsible for paying the interest on the loan from day one. This interest may or may not be due each month while the student is in school, but if it isn't then it accrues during that time period and is added to the balance of the loan. Then, after the student graduates or is otherwise not enrolled at the university full time anymore, he/she has to start making payments on the loan. Again, this is an option for students with bad credit, as this loan is also based upon need, and is partially or fully guaranteed by the federal government.

In summary, bad credit is no excuse for someone not to attend college, as there are several federal government loan programs available that are open to students with less than perfect credit.


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