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! Even if you have bad credit there are still student loan options out there that can help you pay for school.
Federal Government: The 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. These include Stafford Loans and Perkins Loans.
Federal loans are a good solution because:
• 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 Your Loans
After you graduate, do everything you can to pay back your 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.