Intro: How to Get Student Loans with Bad Credit | Things to Know Before You Apply for a Student Loan
Why are so many people interested in learning how to get student loans with bad credit? In today’s economy, everyone is looking for a way to make more money and achieve greater job stability. One of the best ways to get ahead is to get an education.
Study.com says, “…lower education levels tend to correspond with higher unemployment rates. In 2015, adults with bachelor’s degrees took home more than those with high school diplomas. Degree holders earned $48,500 a year, while diploma holders earned $23,900.”
That’s a pretty big difference in yearly income. But for people without a degree who may have had to deal with job losses and other setbacks, it’s very common not to have enough income to go to school. It’s also, unfortunately, common to have poor credit. So how do you get a student loan with bad credit?
People looking for ways to get student loans with bad credit just want what everybody wants: they want to provide for their families, save for retirement, and get ahead. It seems like a never-ending cycle: you want to improve yourself and your financial situation, but you don’t have the money to go to college. The only thing to do is to look for student loans with bad credit.
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Most people have heard of student loans. But if you have bad credit, is that really an option for you? Can you get a student loan with bad credit?
You might be surprised to learn that yes, even people with bad credit might be eligible for student loans to go back to school. It is even possible to get a student loan with bad credit and no co-signer.
This article will detail 6 things you need to know if you are curious about how to get student loans with bad credit. Who knows? This may be the information you need to change your life.
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How Do I Get a Student Loan with Bad Credit?
Simpletuition defines student loans as, “a form of financial aid designed to help students afford a college education. As these loans are tailored for students, they have low interest rates and flexible repayment terms that enable students to repay the borrowed amount with ease.”
There are different types of student loans, and there are many ways to get student loans for bad credit without a co-signer. The broadest classifications of student loans are federal and private loans. Federal loans are great for people with less-than-stellar credit because they are not given based on credit.
They are given based on the need of the student. They are an excellent resource for people who need student loans for bad credit without a co-signer.
Federal loans offer easier repayment schedules and more time to pay back what you owe than private student loans. So, can you get a student loan with bad credit? The answer to that question is absolutely.
The federal government actually offers student loans—sometimes even grants—to people based on their need instead of their credit. So don’t be afraid to apply for student loans with bad credit. This is one deck that isn’t stacked against you.
Why would the federal government grant student loans for people with bad credit? Well, your education is not just good for you. It’s good for the entire economy.
A person making $23,000 a year isn’t paying nearly as much in taxes as a person making $48,000. It’s in the government’s best interest to allow access to college education for everyone. In other words, the best thing to do is to start out in your attempt to get student loans with bad credit and no co-signer by looking into government loans.
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Types of Federal Student Loans
According to Debt.org, the two main types of federal student loans for people with bad credit are Stafford loans and Perkins loans. Debt.org states, “Stafford and Perkins Loans are federal loans given directly to the student. This type of loan, which is funded with government money, comes with low interest rates and favorable repayment options. It also requires no credit check or collateral.”
If you are still living with your parents and they want to help pay for your education, you might qualify for a PLUS loan. This can allow you to get a student loan with bad credit. If you are a graduate student, you might be eligible for a Grad PLUS loan. These are all available types of student loans with bad credit and no co-signer.
Let’s break the types of loans down a little so you can make the best decision possible for your future.
Stafford Loans
Debt.org says, “Stafford loans are more common than Perkins loans. Money for these loans comes directly from the federal government in a program called the Federal Direct Student Loan Program (FDSLP).There are two types of Stafford loans: subsidized and unsubsidized. The type helps determine your interest rate and maximum loan amount.”
A subsidized Stafford loan is one of the best types of loans to take out if you are trying to find student loans with bad credit. It is definitely the most common.
Your annual interest rate will be at or below 6.8%, and while you are in school, the federal government pays your interest for you. What that means is that you don’t have to make payments on subsidized Stafford loans until you are out of school. This program makes it easier to pay back student loans for people with bad credit.
The catch is that you have to be able to demonstrate financial hardship. Most of these loans go to people who make less than $50,000 per year. You also cannot take more than $23,000 in subsidized student loans out during your undergraduate studies. Depending on where you intend to go to school, this is a great way to get student loans with bad credit because it can cover most of your tuition.
The second type of Stafford loan, also a great way to get student loans for people with bad credit, is an unsubsidized loan.
According to Debt.org, “If you have an unsubsidized loan, you’re responsible for paying off all the interest. Interest builds up at a fixed rate of 4.66 percent while you’re in school, but payments are typically deferred—or postponed—until after you graduate. All students are eligible for this type of loan—” even people who need student loans with bad credit.
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In other words, if you have already maxed out the amount of subsidized loans you can take, or alternately, if your family is more well-off, you can take unsubsidized loans.
Unsubsidized loans have limits, too—between $5,500 and $12,500. If you take out unsubsidized student loans with bad credit, you will be limited in the amount of subsidized loans you can take, and vice versa. In total, you can only take $138,500 in Stafford loans for both undergraduate and graduate studies unless you are studying to become a doctor.
In other words, you can definitely get a student loan with bad credit through this program.
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Perkins Loans and PLUS Loans
Perkins loans are more rarely given than Stafford loans because they are harder to get. A student must be able to demonstrate significant financial need. They have an annual interest rate of 5%, and they are completely unsubsidized. This is another great type of student loan for people with bad credit.
Instead of distributing Perkins loans directly to students, they are distributed to individual schools, who issue them based on need and the number of students they have enrolled who qualify. They have considerably smaller limits than a Stafford loan, too—eligible undergrads can only borrow up to $5,500 per year in Perkins loans, with a max of $27,500 for an entire undergraduate degree.
If you are planning to go to a state school or community college, this might cover a lot of your tuition. Perkins loans are a great way to apply for student loans with bad credit.
The last type of federal student loan that might enable you to get a student loan with bad credit is called the PLUS loan. It is for the parents of undergrads or for graduate students. There is no limit to how much you can take on a PLUS loan. It can be used to cover anything that other student loans don’t cover.
The interest rate is higher, though—it’s all the way up to 7.2% annually. This might be harder to pay back for people trying to find student loans with bad credit.
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Can I Get Private Student Loans with Bad Credit?
Maybe you’re looking for a private student loan with bad credit. If you’re one of those with a strong credit history, or you’ve already maxed out your federal loans, a private loan may be your best course of action.
Please bear in mind, though, that FinAid.org says, “As a general rule, students should only consider obtaining a private education loan if they have maxed out the Federal Stafford Loan.”
A private student loan is much like any other private loan—it’s similar to a mortgage, a car loan, or even a credit card. It takes your credit score into account, you have to pay back interest and fees, and you have to start paying it back immediately.
In other words, it can be difficult to get private student loans with bad credit. It can be even harder to get student loans with bad credit and no co-signer.
You might be able to get private student loans with bad credit if you have a co-signer who has an excellent credit history. Private loans are not a great option for people who want student loans with bad credit or who need student loans with bad credit and no co-signer.
If you take the advice from FinAid.org discussed earlier and take out federal loans first, you may be able to improve your credit enough to get a private loan by repaying the federal loans on time.
Wouldn’t it be nice to not spend your time worrying about how to get student loans with bad credit? Let’s say that you have improved your credit and maxed out your federal student loans, and you are still in school. What type of private student loan should you accept?
FinAid.org breaks it into numbers for us: “The best private student loans will have interest rates of LIBOR {LIBOR is the 3-month average of the London Interbank Offered Rate. LIBOR is the average interest rate paid on deposits of US dollars in the London market.} + 2.0% or PRIME {PRIME is the Prime Lending Rate as published in the Wall Street Journal. This is the rate banks charge their most creditworthy customers}—0.50% with no fees. Such loans will be competitive with the Federal PLUS Loan. Unfortunately, these rates often will be available only to borrowers with great credit who also have a creditworthy co-signer. It is unclear how many borrowers qualify for the best rates, although the top credit tier typically encompasses about 20% of borrowers.”
This is a lot of information to digest. What you should take away from this paragraph is that if you want to take out private student loans with bad credit, it won’t be easy. You need to be aware of how much you will have to pay back in interest and fees. Unlike the federal government, banks and lending companies are trying to make money from customers instead of by improving the economy.
That doesn’t make them bad, or even unnecessary. It just means it’s harder to get private student loans with bad credit than it is to get federal loans.
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How Do I Apply for Student Loans with Bad Credit?
A person who is only interested in student loans with bad credit and no co-signer will find it in his or her best interest to look into federal loans first. They have the lowest interest rates, the easiest repayment options, and the easiest screening process. In short, federal loans are the best way to get started on your educational journey if you need student loans for people with bad credit.
What should you do to go about getting a student loan with bad credit? Your first step is to fill out a FAFSA form. Not only will you be told if you are approved for any student loans, you will also find out if you’re eligible for grants and work study. Grants and work study are even better than student loans for people with bad credit because you never have to pay that money back.
So what are you waiting for? With all of these options to get a student loan with bad credit available to you, don’t let bad credit or low income stop you from chasing your dreams. In a world where you’re a college graduate, everyone will be better off. Apply for student loans with bad credit today, and don’t put it off just because you think you may not qualify.
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