People with bad credit often have a harder time getting loans and have to pay much more money when they do. Fortunately, students and families don't have that problem when looking for student loans because there are a number of non credit based student loans available. In fact the most common type of student loans are non credit based student loans. So there is no need to worry about lenders digging into your less than perfect credit history when searching for a way to pay for college.
Where to Look for Non Credit Based Student Loans The most common place you will find non credit based student loans is from the US Federal Government. The federal government, through the Department of Education, has many loan programs designed to help students afford the ever-rising cost of college. None of the student aid programs offered by the federal government require a credit check, which means that all of the loans from the federal government for students are non credit based student loans ("Student Aid Eligibility"). However, loans offered to the parents of students, PLUS loans, do require credit checks ("Parent Loans"). So, if the student aid programs aren't enough and your parents have a poor credit history, it will be difficult to get parent student loans with low interest rates and favorable terms from the government.
Non credit based student loans are mostly non existent in the private market. Private lending institutions, such as banks, credit unions and savings and loan associations, almost always do credit checks before issuing loans. So, you should utilize all the sources available from the federal government before you consider applying for private student loans. Having bad credit doesn't mean you won't be able to find a private loan, but it does mean you'll have to pay high interest rates and have less than ideal terms.
How to Apply for Non Credit Based Student Loans It's easy to apply for non credit based student loans. Because all the programs are managed by the Department of Education you only have to complete and submit one form to apply for all of them. The form you need is called the Free Application for Federal Student Aid, or FAFSA. The simplest and fastest way to fill out and submit the FAFSA is to do it online at www.fafsa.ed.gov. Once you submit the application, the Department of Education and then the schools you have applied to will process it. After your form has been processed, each school will send you an Award Package detailing the federal loan programs that you are eligible for and the amount of aid you can receive. Then, all you have to do is decide whether to accept or decline the student aid. The best part is that not one step of the process relies on your credit history.
Types of Non Credit Based Student Loans There are several non credit based student loans that you are likely to receive in your Award Packages. Here's the basic information about them to help you better understand the student loans you can accept or decline.
- Federal Perkins Loans: If you get Perkins loans in your Awards Packages, you should feel pretty good because they are the best non credit based student loans you can get. They have the lowest interest rates and the most favorable terms. However, they are only given out on a need basis, so not all students are eligible ("Campus-Based Aid").
- Stafford Student Loans: Stafford student loans are the most common type of non credit based student loans given out by the federal government. They come in two varieties, Direct Stafford loans and FFEL Stafford loans ("Stafford Loans"). The main difference between the two is that for Direct loans the Department of Education is your lender, but for FFEL loans private financial institutions, such as banks and credit unions, are your lenders. The private lenders have agreed to participate in the government-regulated loan program, so the terms of the Direct and FFEL loans are very similar ("Stafford Loans"). Both Direct and FFEL loans can be either subsidized or unsubsidized. If your loans are subsidized then you don't have to repay the interest, but if your loans are unsubsidized you are required to make interest payments ("Stafford Loans"). The subsidized versions of the loans are given out on the basis need, but anyone can get the unsubsidized versions, regardless of need.
All students regardless of credit history can find some aid to help them pay for college. Non credit based student loans are one way that you can get assistance paying for your education even if your credit history isn't perfect. If you can't get enough aid from the government, you can look for private student loans. Just be prepared to pay a lot more in interest and fees.
