Different Types of Poor Credit Student Loans
We’ve all heard the statistics about the effect more education will have on your income, but we’ve also heard the statistics about the rising cost of a college education. People with great credit dive right into school because they feel like borrowing money to pay for it won’t be a problem. But what about prospective students with bad credit? Not to worry – you can count on poor credit student loans to get you through your education. But first you need to educate yourself on what types of student loans are available to poor credit borrowers.
The first kind, and best kind, of student loans, are those backed by the federal government. Stafford loans and Perkins loans are not granted based on your credit score or history as a borrower. The government backs these loans so lenders will give you money you need for school without taking a good look – at all – at your ability to repay it. The understand the statistics and recognize that on average people will repay those loans once they graduate. So not only are the Stafford and Perkins programs great student loans for poor credit borrowers, they’re also very low interest.
There are two different kinds of Stafford loans: you have the unsubsidized version and the subsidized version.
Subsidized Stafford loans are given to students who meet the government’s qualifications to declared ‘needy.’ These loans are great because the government pays all the interest on the loans, for the entire time you’re in school. Once you graduate you’ll still have a six month grace period before your payments on the loans become due and you become responsible for the interest as well.
Unsubsidized Stafford loans have only one difference – the government doesn’t pay the interest on the loans while you’re a full-time student. But that doesn’t mean you have to pay it. It just means that while you’re in school the interest accrues and once you reach the end of your grace period you’ll be responsible to pay back the principle on the loan as well as the interest that accrued before you graduated.
Perkins loans are less common, mostly because most people aren’t in enough financial hardship to qualify.
Stafford loans and Perkins loans are obviously the best choice, but if you have to rely 100% on loans to get yourself through school, these loans aren’t likely to be enough. You’ll have to look to alternative borrowing sources, and that may mean seeking out private poor credit student loans.
This can be risky though. Private student loans with bad credit have none of the same perks as the government supported loan programs. The interest rates can be brutal, and you aren’t likely to find consolidation programs that compare in any way to those that go with the government loans. Many students take on private loans not realizing that they’re locking themselves into payments and interest rates that could either make their credit worse or push them into careers that don’t interest them at all because they need the higher salary.
If after evaluating your financial needs to get through school you realize that government subsidized loans won’t be enough, I’d strongly encourage you to delay the education for a short time and work toward saving enough money to get through school without private student loans with poor credit.