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Student Loans

If you’re interested in going to college, but worried about financing because of bad credit, you can put your worries to aside. While it is much easier to secure a student loan with good credit, obtaining one with bad credit is far from impossible.

When considering your financing options, an individual with good credit usually has two ways to go; federal financial aid and private financial aid. For those individuals with bad credit, a private student loan is generally out of the question unless he/she has a person with good credit co-sign for the loan. Thus, most people with bad credit turn to the federal government for assistance.

However, unlike private loans, a person with bad credit doesn’t have to deal with the strict guidelines and high interest rates they would normally face when dealing with a private lender because federal financial aid doesn’t take into consideration a person’s credit score. The reason for this is that federal financial aid, particularly Stafford Loans, assume all loan applicants are newly graduated from high school and entering college, and thus, don’t even have a credit history.

A Stafford Loan allows students to borrow as much as $18,500 per year to cover the cost of tuition, as well as other related expenses, such as books, supplies, housing, computer, etc…$10,500 of the loan is considered unsubsidized, which means it accrues interest while your attending school. The remainder, $8,500, is subsidized, meaning the federal government pays the interest for you while you’re in school. You do have the option of paying the interest on the unsubsidized loan while in school, and probably should because all interest paid on student loans is tax deductible.

The interest rate for federal education loans is set according the national average, yet is lower than the rate you would get through a private lender. It also can never exceed 8.25% by law.

The entire loan process works like this: once you fill out the loan application and are approved (which you should be unless you have defaulted on any previous federal loans) you will receive a notice from the school you plan to attend and be scheduled to take a short class which covers your obligation in regards to repaying the loan. The funds will then be dispersed to your school’s financial aid office and they will deduct what you owe in tuition and then give you a check for the remaining balance. It should be noted that you don’t have to borrow up to the maximum amount if you don’t want to. $18,500 per year over four years can be a hefty sum to pay back, so you’d be well advised to borrow only what you need.

Upon graduation, attending school less than part time, or leaving completely, your loan enters a deferment phase. What this means is you get six months before you have to begin repaying the loan. There are different repayment plans available so look into which ones work best for you. It should also be noted that if you run into financial trouble most federal lenders are very accommodating and willing to work with individuals; all you have to do is contact them and discuss the matter. In addition, if at any time you decide to reenter school or earn another degree, you don’t have to continue making payments on the loan, and once you finish school you get another six month deferment.

Bad credit doesn’t keep anyone from getting a college education. It may keep you from attending an Ivy League school because of the monumental costs, but the federal government offers enough money for anyone to get an education.


NextStudent can help you consolidate your multiple student loans. NextStudent is a leading provider of both private and federal student loan consolidations. They also have a state-of-the-art scholarship search engine.

NextStudent's scholarship search engine has received numerous awards and recognition including spots in Newsweek and Home PC's "Editor's Choice Award Winners," and features on CNN and ABC's 20/20.

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