Wednesday, July 6, 2011

Bad Credit Student Loans - Choosing Wisely

Can bad credit have an impact on furthering your education? Some adults may have made a few bad decisions or experienced some bad luck and therefore have bad credit ratings. Perhaps these do not play a significant role in their lives until they need funding to return to school and further their education. They may need to consider taking out a bad credit student loan.
Education loans traditionally have the lowest interest rates.
Federally guaranteed student loan programs have virtually guaranteed that education fund lenders have been consigned to low interest rates. For instance, Pell grants virtually give away money to students in need. Scholarships and other grant programs assure a steady flow of education funds among the student populace.

Other federally guaranteed loan programs offer very low interest rates. It goes without saying that private lenders have to maintain low interest rates to remain competitive. Also, since people with college degrees tend to double their lifetime incomes as compared to high school graduates, investing in these folks represents a good risk for lenders.
Stafford loans are the premier student loan offer.
Qualifying for a Stafford loan is made under the assumption that the average college bound student has just been graduated from high school and therefore has no credit history to speak of. These loans look specifically at need; they do not even consider the credit history of the applicant. Students can reach a capped limit on Stafford loans, but these were not intended to cover the entire cost of an education, only to fill the lacuna for books and other expenses not covered by scholarships or grants.
Perkins loans are an excellent source of bad credit student funding.
Once again, as with Stafford loans, the Perkins loan assumes the applicant has no credit history at all, thus it too is an excellent bad credit student loan. These loans are quite appropriate for adults returning to schools to further their educations. They offer higher capped limits than Stafford loans. But, they do have more variable interest rates. Also, the application process can be somewhat arduous.
PLUS loans offer conventional business loans for education.
PLUS loans are aimed at the parents of student with poor or no credit histories. They are more or less conventional business loans offered at competitive rates. Students who have done service in the military rely on this funding vehicle a lot. Sometimes, during a stint in the service, veterans have ruined their credit history. The PLUS loan allows them to receive educational funding with a boost from their parents.
Private lenders offer bad credit student loans as well.
Perhaps such loans should be considered as a last resort. Many private lenders will make an unsecured student loan but the rates will be considerably higher than the loans offered by the three programs mentioned above. One advantage they have is the shorter application cycle. They run into weeks rather than months. They can conveniently fill an expedient bill and can perhaps be refinanced at a later date. But, because of the higher interest rates, they should be left as the funding source of last resort.
Opportunities abound for funding higher education. While a bad credit student loan is one source, any student, returning or otherwise, should avail themselves of all available sources. Grants, scholarships, federally guaranteed student loans, work-study programs, and other venues should all be tapped so that the pursuit of a higher education does not mean life long debt.
Hilary Bowman is the author of this article. She works successfully as a financial advisor with years of expertise on Unsecured Loans. Hilary publishes informative articles about loans for bad credit and other financial topics at

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