Going back to school can be the stepping stone you need to get a higher paying job. However, with tuition and the cost of attendance on the rise nationwide, many prospective students are looking towards various loan options to finance their education. But what types of loans are available to people with bad or no credit? One of the largest providers of student loans is actually the United States Federal Government, with a variety of loans aimed at assisting students and families with poor or no credit history.
The majority of Federal student loans are designed to have the student repay their loan balance back after graduation, removing the hassle of repaying the loan while being a full-time student.
Although these loans can be provided by the government, they do carry an interest and you must be a full-time student to qualify for most (12 credit hours per week or more).
One giant advantage from Federal loans is that they do not require a credit check or high credit score, although your interest rates may be higher.
According to www.studentaid.ed.gov , the government-mandated student loan website, there are 2 types of federal student loan programs.
The William D. Ford Federal Direct Loan Program (Often referred to as just the “Direct Loan Program”) and the Federal Perkins Loan Program, where the school is the lender for the loan. The most common loan program by far is the “Direct Loan Program”
Under the “Direct Loan Program”, there are 4 types of loans:
- Direct Subsidized Loans- These loans are for students who show a significant financial need through their FAFSA application to help cover the expenses of college or a career school. They are “subsidized”, because the government will pay for a portion of the interest on your behalf. This loan can be paid back after your graduation date.
- Direct Unsubsidized Loans- For this loan, you do not need to show financial need to become eligible. This loan carries a higher interest rate than the Direct Subsidized Loan listed above. This loan can be paid back after your graduation date as well.
- Direct PLUS Loans- Often referred to as a “Parent PLUS Loan”, this loan is available to “dependant” undergraduate students and also students attending post-graduate programs. This loan DOES require a credit check. If you are an undergraduate student, you must begin repaying the loan once the loan amount is deposited. If you are a postgraduate student, you are not required to repay the loan until graduation.
- Direct Consolidation Loans- This loan is designed to let you combine your federal education loans into 1 simple loan, resulting in just 1 monthly payment. In some cases, this loan consolidation can cause you to pay a higher interest rate.
You can read our full 10+ page guide on student loans here.
Federal Perkins Loans also carry a low-interest rate but are only available to students in dire financial need. It is important to note that the school/institution is the lender in this case and that not all schools participate in this specific loan program.
To qualify for these loans, you must submit a FAFSA application (Free Application for Federal Student Aid) each and every year. Once your application is submitted, you will have access to a “portal”, usually, through your university, that shows what loans you qualified for and up to what dollar amount.
You do not need to pay to apply and the FAFSA office has a phone service with representatives that can walk you through the application process.