Poor Credit Student Loan
Poor Credit Student Loan - Paying for college can make you cringe - the sticker shock is frightening - enough to keep most parents awake at night. There is good news though even if you are applying for a student loan and you have bad credit.
You'll find that even with no credit or lousy credit, most students seeking higher education are able to secure funds for college and higher education.
Lets understand the types of student loans first:
There are 4 major types of student loan categories :- Government-backed loans for students
- Government-backed loans for parents
- Private loans that aren't backed by the government
- Consolidation loans
Government-Backed Student Loans
If you have little or no credit you should look into a Stafford or Perkins loan.
Stafford Loan - The lender for this type of loan, whether it's the Federal Govt or a financial institution, does not look at your credit report. If you've had bad luck with credit it shouldn't affect your chances getting a Stafford loan, even if you your credit is disastrous.
Perkins Loan - Typically granted to those students who are neediest. The federal government funds these loans, and your credit history or FICO score is not an issue. If your credit history is in the toilet …don't worry…you'll be college bound before you know it.
There is one exception - No payback, no loan If you have a Federal loan in default or owe money to the Federal govt. you can't get a Perkins or Stafford loan.
Government-Backed Loans For Parents
Need More Funds?- The Fed limits the amount you can borrow from Stafford and Perkins loans but what if you need more funds? A loan program set up for parents called PLUS (Parent loans for Undergraduate Students) can help absorb some of the cost.
What PLUS looks at is your recent payback history. Have you been current on all your credit accounts? If you are delinquent 90 days on any credit loans (car, mortgage, credit card etc..) you will be considered an "adverse risk" and will NOT receive a PLUS loan.
You can have a lousy FICO score and still qualify for a PLUS loan because PLUS looks at your RECENT credit history (last 90 days) - not your credit report which can have derogatory items for the last 7 years. So a 30-day late payment on a credit card 5 years ago will not be an issue in qualifying for this type of loan.
Why the loose lending standards for student loans? Very simply to broaden access to higher education - colleges, and trade schools, not restrict it. Generally the interest rates are low on government student loans - around 4%. Payback begins as soon your full time school status ends.
Private Loans
For many students these Stafford, Perkins and PLUS loans are not enough to fund your education. Especially if you plan on going to medical or law school - expect to pay some serious coin for your education.
You may have to look into a private loan to take up the slack to get completely funded.
Credit is an issue - Unlike the Stafford or Perkins loan, your credit score will be a consideration. If you have poor credit, student loan options are available but expect higher interest rates and some fees, possibly.
Earning power an issueAlso many lenders will consider the degree program you are enrolled in as well as your grades when determining the amount of your loan. For example, a medical student with good grades may qualify for more than a student enrolled in an education program.
Why?
Lenders look at future earning power for each candidate when assessing a risk profile. They assign a lower risk of loan default to a candidate with a potentially high salary. So even if you have poor credit, student loan opportunities are widely available via private loans - you'll just have to pay more.
Consolidation loans
Consolidation loans are available for students and work the same as a mortgage consolidation loan. If you have several loans you can roll them into one federal consolidation loan and make one payment with new terms and new interest rates.
Sallie Mae's Smart Loan is a program that consolidates federal backed student loans - no credit check is required for this program. Whether you qualify for a government loan consolidation has to do with how you made the original loan. Who did you borrow from?
Federal Government - No credit check required. They will probably grant you a loan consolidation so long as you are not in default on any student loans at the time. If you are in default you may still get the loan consolidation but you may have to jump through hoops to prove you are a good risk.
Private lender - possible credit check required - A private lender may or may not check your credit when deciding on a loan consolidation. If you have adverse credit you may be turned down. In this case you may still qualify for a government consolidation loan, however you may be required to explain your financial circumstances in detail.