When your finances are in shambles, it can be really tough to pay for your education. It's also frustrating to have to take out student loans because you already have debt that you're struggling to repay - hence the bad credit. This lesson will help you to learn why Pell Grants are vital for a person in your situation and how you can use them to pay for your education.

Pell Grants are of course very useful for people of every credit standing and situation. However, for people that struggle with credit they are especially important because those people will have a hard time getting private student loans. Sure, they may be able to get Stafford loans or Perkins loans but if they don't cover everything, trouble is going to be there. Pell Grants can help to offset this problem. We'll cover more about these grants in this lesson but before we get to that, let me offer you a huge word of advice. Pass your classes if you take out Pell Grants. If you don't, you will lose your eligibility for them.

The qualification process for Pell Grants is based entirely on need. The people that need the money the most can qualify for Pell Grants. When I was in college I had terrible credit. My parents never taught me about it and the first chance I got to get a student credit card I ran it up to the limit and didn't pay it off. The first time I checked my credit score I found out that it was below 550.

Did this mean that I couldn't qualify for Pell Grants? Absolutely not, credit isn't part of the application process. I was able to get Pell Grants and they helped me to pay for school.

The first question you need to answer when reading this is what does bad credit even have to do with Pell grants. The simple answer is absolutely nothing, as Pell grants are a program that is in place to help financially disadvantaged people attend college and aren’t designed specifically to help you pay off any debts you may have.

As you can guess however there is a more complicated answer and it can be a good one. Basically if you are looking at Pell grants you must be enrolling in college and planning on attending. If this is you then read on as there are a few ideas and tactics for using Pell grants to help improve your credit history.

Pell grants as opposed to a loan are given to you and do not require repayment. Yes, you read that right, Pell grants are free money. The only stipulation is that you attend school. Failing to do so could put you in violation of the grant covenants and you may owe the money.

So how do you use Pell grants for bad credit? The answer is simple as you can use the money any way that you want. If you can get some scholarships, cheap school loans, etc. then you can take the free money to pay off some bad debt and improve your credit score. You can also go in and restructure your debt by taking out a large school loan, with a very low interest rate, and then paying off your debts that are at higher interest rates. In addition the school loan typically does not need to be paid back until you are done with school.

These programs obviously have many advantages and inefficiencies that you can exploit. As long as you are still in school you can use these to your advantage and use Pell grants for bad credit, or just to restructure and improve your debt situation.

Another useful thing to do with Pell grant’s as well as student loans is to have low to zero debt and then get a private scholarship. You then apply for the school loans and Pell grants anyways and if you get accepted you can take the money and put it in higher yielding Treasury bonds or investment grade debt. The risk in Treasuries is virtually non existent if held through maturity while you will want to know what you are doing before you buy corporate bonds. By doing this you can earn the carry, or the difference between the rate you pay and the interest that you receive. It doesn’t add up to a ton but it is or at least can be free money so it is something worth looking into.

If you want to apply for Pell Grants, you wil first have to fill out a FAFSA. This will help the government to determine whether you are eligible.  As part of that process you're going to have to declare your dependency status, in other words whether your parents are still taking care of you or not. You will then provide information about your income and about your parents' incomes. They will then decide whether you're eligible or not.

If you have bad credit, I would highly recommend learning as much as you possibly can about dealing with it. Here are some articles I have created that should help you to understand how to deal with bad credit:

• FHA loans for people with bad credit
• Getting auto loans with bad credit
• Credit cards for bad credit
• Bad credit loans with no collateral
• Getting bad credit loans