Getting a Student Loan With Bad Credit

Federal Parent Loan for Undergraduate Student (PLUS)

PLUS loans are federal loans available to graduate or professional degree students and parents of dependent undergraduates. They’re not as advantageous as Stafford Loans since PLUS loan repayments are not deferred until graduation, and the interest rate will be higher than for Stafford Loans. But, despite those drawbacks, PLUS loans are another convenient way for parents to subsidize their children’s education after they finish high school.

With PLUS loans, the borrower’s credit is definitely considered. Here are the requirements:

– No current student loans in default

– No Chapter 7 Bankruptcies within the last five years

– No foreclosures during the last five years

– No repossessions within the last five years

– No tax liens during the last five years

– No wage garnishments for the last five years

– No unpaid collections or charge-offs

If you cannot qualify for a PLUS loan on your own, you may get a cosigner. 

Government Loans Aren’t the Only Game in Town

Even though government-backed loans like the Stafford Loan are generally the best deals for people with bad credit scores, it won’t hurt to look into an education loan from your bank or credit union. Of course, the deal you can get from a private lender will greatly depend upon your credit score, so bear in mind that you will not qualify for the most favorable interest rate if your credit score is very low. In general, credit requirements for private student loans are:

– Have no open collections or charge-offs within the past two years

– Have had no bankruptcies during the last seven years

– Has not defaulted on other student loans, federal or private

– Has at least three years of credit history

– Has a FICO credit score of at least 650

Another thing to consider with private lenders is the type of loan you’re applying for. If you get a private student loan, you’ll probably be able to get deferred payments, but if it’s simply a personal loan, then you’ll most likely begin making payments immediately. As with any loan from a commercial lender, if your credit score is below 620 and you have late payments on credit cards, a car loan, or your mortgage (or any kind of defaulted account on your record), you will not be able to get a student loan without a cosigner who does have good credit.

Get All the Help That You Can

Even if you’re a financial wizard, you’re still going to need help finding and applying for loans. The dense language in the loan documents often makes them hard to wade through, much less completely comprehend. Take advantage of all the financial advice you can get from the nice folks in your school’s bursar’s office. Most universities have onsite lending offices; the loan officer at your intended educational institution can steer you toward the best deals in financial aid. Some colleges or universities have long-standing affiliations with certain lenders, and it’s possible that the loan officer can connect you with a student loan with favorable terms and an interest rate that fits your budget.

By Kristy Welsh, Credit Expert at CreditRepair.com