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College Loans For Students With Poor Credit

Updated on August 14, 2008

College Loans For Students With Poor Credit

If you are trying to raise the necessary money for college and have a poor credit record then you may believe that loans are simply out of the question. However, this is not necessarily the case and there are a number of federal loans which may be available to you and which are granted purely on the basis of need and irrespective of your credit history.

Before getting into loans though, one of the oldest forms of federal funding are Pell grants, which are given principally on the basis of your economic status. Pell grants are virtually automatic if you have the necessary supporting documentation to show that you and your parents qualify as a low income family. Pell grants are currently just over $4,000 and the important thing to remember is that they are a grant and not a loan, so that this money does not have to be repaid.

Even if you do qualify for a Pell grant it is unlikely to be enough to cover your costs in college and so you will need to seek a loan in addition to your grant. With or without a grant, there are several federal student loans available and the most common of these are Stafford loans which can be either subsidized or unsubsidized.

The most desirable Stafford loans are subsidized, which means that the government pays the interest on the loans while you are attending college and generally for the first six months after graduation.

Less desirable are unsubsidized Stafford loans for which you will be responsible for paying the interest charges. Once again, repayment of unsubsidized loans does not normally start until six months after graduation and interest which accrues during your time in college is simply added to the principal of the loan. This is of course something which you need to take into account each time you take a Stafford loan as accrued interest will of course increase the amount of your loan so that when you do start repayments they will be on a combined loan which is greater than the amount which you have actually borrowed.

Unfortunately it is not always easy to get a subsidized Stafford loan but the great advantage of unsubsidized loans is that they are almost always available.

Stafford loans are not unlimited and there are ceilings to the amount which you can borrow during each year in college. Overall however Stafford grants can be expected to cover anywhere from about 25% to 40% of total costs for most students.

So far so good but you will probably still be left with a shortfall and faced with looking to the private sector for the balance of your funding. So how do you go about getting a private loan with a poor credit history?

One good route if you need student loans for bad credit is to look for a loan based on someone else's credit record rather than their own and this person is often, though not necessarily, a parent. In this case the person acts as a cosigner to your loan and undertakes to guarantee the repayment of the loan. On this basis the private lender will normally grant a loan based on his or her credit record and not on yours.

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