If you need help paying for college and have less than perfect credit, there is good news. Today, not only are there several types of federal student loans that are not credit-based, but federally funded, subsidized student loans generally offer one of the most flexible types of loans available.
Make friends with the FAFSA
To apply for the types of federal student loans that are not credit-based, you’ll first need to fill out your FAFSA (Free Application for Federal Student Aid). Note: This is an important step for any student, regardless of your financial situation. If you are a dependent, you and your parents will both need to provide the government with personal information such as your Social Security Number, recent federal income tax returns, bank statements, etc. If you are independent, you’ll only need to supply your own information. You can find a full list of required materials at FAFSA.ed.gov.
Stafford loans and Perkins loans are within your grasp
The subsidized Stafford Loan is need-based, and does not use your credit score to determine your eligibility. (Unsubsidized Stafford Loans are also available. They do not require a credit check, but are not need-based.) Stafford Loans are open to all legal residents of the U.S. who have been accepted or are currently enrolled in a college, university, or postsecondary education institution. While your credit score is not a consideration, it’s important to note that if you have previously defaulted on an older student loan, or you owe a refund to an old education grant, your eligibility may be affected.
The Perkins Loan is another need-based loan issued through your college or university. Perkins Loans funds are reserved for students who can demonstrate a significant need for educational financing, with the majority of loans going to families who make under $25K a year. As with the Stafford loan, your credit health is not a factor, but if you’ve defaulted on student loans in the past, that will hurt your chances of securing a Perkins Loan.
Know the difference between “subsidized” and “unsubsidized”
When you accept “subsidized” Stafford Loans, the government pays off any interest that accrues while you are enrolled in school. “Unsubsidized” loans are not subsidized by the government during your enrollment, and interest starts to accrue immediately. In both instances, you’ll typically begin making payments on your Stafford Loans nine months after graduation.
Consider a cosigner
If you have bad credit or no credit, finding someone with good credit who supports your educational goals to cosign on your loans, may change your eligibility status for a wide variety of private loans from respected private lenders. Being a cosigner has its risks, however (check out this handy list of “Important Things to Know When Considering a Cosigner” from SallieMae), the federal government’s low interest rates and flexible terms may be hard to beat, so if you do decide to shop around for private loans, be sure to weigh your options carefully.
If you’re left with lingering questions about student loans, you can find out more about how student loans work or how to get a student loan in the Protective Learning Center.