Finance Roll

For all high-school graduates, finally going to college and spreading their wings is an exciting time. But the reality of a college education is that it costs money, and financing it is not easy. Students are considered bad credit borrowers by lenders, but these same lenders see potential in students too. This is why it is possible to get student loans with bad credit.

Their poor credit rating comes down to a lack of evidence confirming they make loan repayments on time. But students also need to establish a credit reputation, so loans are granted to them. The trick is to find low interest loans, and that is where federal financial support comes in.

In almost every way, federal student loans offer more to college-goers, making them the best college financing option. But there is more than one federal program available, and finding the right one depends on a number of factors.

Why Choose Federal Financial Aid?

The quick answer to this question is that financial aid, whether issued or subsidized by the Department of Education, is the most affordable. This comes as no surprise of course, since the government is not trying to turn a profit, and so is more willing to approve applicants for student loans with bad credit.

There are criteria to satisfy, but because traditional and private lenders charge higher interest rates to increase their profit margins, students often find that their specific status blocks their qualification. With limited financial resources, secure low interest loans are a necessity.

The great advantage with federal student loan programs is that the pressure to make repayments is not as severe - though that is not to say repaying them in full is not part of the deal.

Federal Loan Options

So, what options are open to those seeking federal financial assistance? Well, the Stafford Loan and Perkins Loan programs are the two chief options. Both are ideal for anyone seeking a student loan with bad credit, but not everyone can qualify for them.

The Stafford Loan is exclusively for those applicants who are enrolling in a college from high-school. The terms offered make it an ideal low interest loan for a first-time college student, with monthly repayments over an extended period of time to keep them low.

They are also available either as subsidized or unsubsidized, meaning the government either pays the interest while the borrower is in college, or the borrower pays the interest and gets a deferment on repayments until after graduation. To get any subsidized federal student loan, it is necessary to demonstrate financial need.

The Perkins Loan, meanwhile, is for those who have already found themselves in serious financial difficulties. The loans are issued by the college, but the government bank-rolls the program. It is a good option for those seeking assistance for a student loan with bad credit, but proving financial dire straits is necessary.

However, for those who do secure this option through their campus financial aid office, it is the best low interest loan deal around. Interest is charged at just 5% and, with a 10-year loan term, the repayments (even after a 9-month grace period) are very low.

Financial Support for Parents

Because federal student loan programs are influenced by government budgets, not everyone who applies gets approved. So, for some, financial support still comes from home. Through the PLUS Loan program, it is possible for parents to get financial assistance in supporting their child at college.

Unlike the Stafford and Perkins programs, the funds are given directly to the parents, but it is only enough to cover 50% of the required funding - enough to ease the extra financial pressure on a family.