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Loans For Students With Terrible Credit

Aug 17, 2007
Student loans or other financial aid provided to students while obtaining a college education is credit extended to a student without any proof of income, but can normally take years to pay-off. Loans can be subsidized either by the government and/or a private lender. Often, a very minimal interest of 5 percent or less is incurred when a student is granted such a loan. As the borrower, the student is not compelled to pay the interest while still in school, which generally makes it easier for the borrower to pay-off debts.

Today, a financial crisis looms over 70 percent of college students concerning their student loans. Even when college students seek the maximum amount made available from their student loans, many undergraduates still find themselves short of cash to cover other necessary college expenses while still in school. Recent developments to this effect also show that more and more undergraduates use at least one credit card on top of the student loans they have drawn out for college.

Because many financial institutions' credit card marketing campaigns have reached virtually every college and university across the country, it has become easier for college students to take advantage of them. Students with very little, or worse --- no income --- use their credit cards to pay for school fees and living expenses, including their particular student loans. With no idea of how much debt they will eventually incur based on bank interests, undergraduates sustain debts and a terrible credit history while still studying. And since the interest keeps piling up, their student loans continue to be left unpaid. In the long run, when these students leave school, they will have accumulated huge debts or terrible credit ratings that will make it difficult for them to apply for a car loan, rent an apartment, or take out a mortgage when needed.

Fortunately, even with a terrible credit rating or bad credit history; there is still hope for students to obtain financial aid. These particular loans will undoubtedly carry higher fees and interest rates. Nonetheless, students with a terrible credit history can still seek aid with help from government programs such as these:

* Perkins Loan

The Perkins Loan is granted to college students who need it the most. It is given to undergraduate and graduate students with extreme and extra-ordinary financial necessity. The money comes from the federal government but it is the individual college that awards it to the borrower. A credit history will not need to be checked, but if the borrower has an existing delinquent loan with the federal government, he or she will not qualify for the Perkins Loan until that debt is reimbursed.

* Perkins PLUS

In other extreme cases, parents of the students will be expected to pay-off their children's debt. In this situation parents can benefit from PLUS, or Parent Loans for Undergraduate Students. An existing delinquent loan will still prohibit the borrower from qualifying for PLUS. However, a student with terrible credit history or even a low credit score will be granted the loan, provided they are not delinquent with succeeding PLUS payments.

* Consolidation loans

Consolidated loans apply to students who have incurred multiple loans which can be combined into one federal loan, payable once per month. In short, it is much like refinancing. Lending companies may or may not check credit records, depending on how the particular institution operates. Even so, any existing delinquent account will prohibit a student from profiting from loan consolidation.

* Pell Grant and Federal Supplemental Education Opportunity Grant

Unlike student loans, these government grants do not need to be repaid, although, not all students are eligible for them either. Certain requirements have to be checked and passed before a student is rewarded one of these grants.

* Loan Forgiveness Program

Under the Loan Forgiveness Program, a student's loan will be paid-off provided they do volunteer work such as military service, choose to teach at a low-income school, or practice medicine in certain government selected communities.

Some colleges may even have alternative programs for specialized studies that are funded and backed by private lending firms. These programs, however, may not be endorsed by the school itself but may provide great assistance to the student in need.

Remember that a student loan is never forgiven to bankruptcy. The government expects each student who has been granted a federal loan to pay-off their loan debts and delinquencies, no matter how long it takes. It is important that while still in school, a student develops correct credit habits to ensure a very good credit rating after graduating from the university. This too, is a preparation for what lies ahead after college life.
About the Author
Jeremy Thompson is the editor of Student.LoanBegin.com which is dedicated to teaching you about student loans. Learn more about loans for students with terrible credit at Student.Loanbegin.com.
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