A few years ago, finding student loans with a damaged credit file was almost impossible. Today, many adults are returning to universities to further their education. The goal is to increase their competitiveness in the difficult job market today.
Even a college age student may have bad credit today. For several years, credit lending banks issued credit accounts even to high school students.
The theory was that parents would oversee these accounts but sometimes young people were carried away with their credit card and had parents unwilling or unable to bail them out.
It is no longer possible for an underage person to qualify for a credit card without a qualified co-signer due to new laws regulating credit practices.
Credit challenges are the norm if you have lost a job through downsizing or company closings. You may spend months trying applying for positions and find you are not as qualified for openings as you thought.
Completing your degree, taking special courses to enhance your skills or pursuing a graduate degree is a step to qualifying for the job you want.
You may have had perfect credit in the past but found yourself unable to pay bills on time after losing your job and income. It can be a shock to realize your credit rating has been seriously damaged.
Finding student loans for bad credit is possible as more programs have been developed to meet the needs of students returning to school after years in the workplace.
Using a Co-Signer
You can get a student loan with bad credit if a family member with good credit is willing to co-sign for your loan.
For students of all ages, this often means a parent but some lenders will accept a sibling or guardian as a co-signer. Only a few lenders will allow a non-relative to be listed as a co-signer but there are a few who will approve such an application.
With a qualified co-signer you can receive better interest rates and terms than you might expect for a student loan. There are dangers for the co-signer. If you fail to repay the loan, the co-signer will be responsible for repayment.
The responsibility of being a co-signer for a student loan where bad credit is a hindrance should not be underestimated. This is especially true in an economy where getting a job after graduation is not guaranteed.
Private Lending Institutions and Personal Banks
If you have a long record of missed payments, late payments and defaults, getting a loan from a private lender or through your personal bank is not an option you should pursue.
However, today most bad credit stems from the weak economy and from job losses that lead to insufficient income to meet obligations.
Good credit in the past will help you prove to the lender you have a temporary credit problem. The bad credit may be from income loss, or from divorce or an illness that created mountains of medical bills.
If you have a logical explanation for bad marks on your credit you may obtain a student loan with bad credit from your local bank or through private lending companies.
You will pay higher interest rates and the terms of the student loan will not be optimal. This is to be expected as bad credit places you in a high risk category in the lender’s eyes.
If a bank is willing to take a chance on lending to you, the bank wants the reward for taking a higher risk. Increased interest rates balance the risk.
Federal Perkins and Stafford loans are another possibility for students with damaged credit. The government loans are provided for undergraduate and graduate students who qualify for financial aid.
These are low interest student loans made up of government and school funds. Processing government loans takes time so any application for Perkins and Stafford loans should be made well in advance.
If your bad credit is the result of a specific problem, you may have an easier time obtaining a loan than you expect. Students with bad credit will find their options limited and will usually need to pay above the standard APR to obtain the funds needed.
So, the conclusion is that loans for students with damaged credit are possible but you will need to fight hard in order to get your application approved.
You can also get student credit cards with bad credit if you research your options carefully.