Bad Credit Education Loans to Help Fund the Cost of College

May 31, 2010
Asa Ghaffar

Where to Get Bad Credit Education Loans - U.S. Government

In need of a way to fund tuition fees, living expenses and college costs? Find out how to get bad credit education loans with no credit checks or cosigner.

One or more adverse credit entries on a personal credit report means that an undergraduate will only be eligible for bad credit education loans. Perhaps more surprisingly, not having a credit history will be interpreted just as unfavorably. This is because lenders like to be able to assess a potential customer's ability to keep-up with a monthly repayment schedule before offering private student loan financing. If student loans without cosigner are required, it is advisable to repair a credit history first.

Need for Bad Credit Education Loans to Meet the Cost of College

Few students can afford to pay for college with savings or parental help so borrowing money is a way of life for the majority of undergraduates. The following are the sort of fees that a typical college student should expect to pay:

The cost of a private 4 year degree course now stands at an average of $26,273 - an increase of 4.4% compared to 2009.
A public 4-year course costs an average of $7,020 - a 6.5% increase compared to 2009.
A College Board press release revealed that the median cost of going to university has increased by between $172 and $1,096 each year.

Federal Bad Credit Education Loans to Pay for College

Perkins student loans. The government allocates a sum of money to schools and they are responsible for ensuring that it is disseminated to those undergraduates in the greatest financial need. The Perkins loan is means tested and the current rate of interest is just 5%. Interest will not start to accrue until after graduation and cancellation programs can be used to help pay off the debt at a faster rate.
Stafford student loans. This is the most common variety of federal bad credit education loans because the majority of applicants are eligible. It is still means tested, but rates are either subsidized or unsubsidized. The most common rate of interest is 6.8%. Although cancellation programs can be used to clear a Stafford loan, interest will start to accrue the moment it is taken out if it isn't subsidized.

Is it Possible to Get Private Student Loans Without Cosigner?

Unlike federal student loans, banks perform credit scoring as part of their approach to risk assessment. Despite the fact that student loan debt cannot be written off, financial institutions don't want delinquent accounts on their books. It may be possible to get a private student loan with a minor adverse credit history, but it is a non-starter for students with more serious credit transgressions. Undergraduates regularly turn to a cosigner with a good credit rating because it increases the likelihood of credit approval. Fail to make repayment and the cosigner becomes responsible for them.

Ways to Improve Credit Before Applying for Private Student Loans

Always request a free credit report before applying for credit. Check the information held by Experian, Equifax and TransUnion as a surprising amount of the data that they hold isn't accurate. For example, name and social security number don't match.
If there's sufficient time, consider taking out a credit or store card and a form of installment debt, such as a student car loan. Making punctual repayments for a period of 6 months will result in a better credit score.
Avoid using more than 10% to 30% of the maximum limit on a card in a single month. Liz Pulliam-Weston of MSN Money stated that: "You typically can increase your scores by limiting your charges to 30% or less of a card's limit."
Pay down debt with personal savings prior to applying for a new line of credit. Lower credit utilization leads to a higher credit score because default levels amongst private student loan borrowers are a lot lower.
Don't make too many credit applications in a short space of time. Each credit search that is performed will show for a period of 12 months. A high number of searches is indicative of financial difficulties and is interpreted as a warning sign by most private student loan lenders.

Federal Student Loans Don't Require Credit Scoring

Although the above methods are recommended before applying for private bad credit education loans, they are not essential for federal loan applications. This is because credit scoring isn't used. Poor credit will normally show on a personal credit report for a period of 7 years.