The dream of going back to school for some is stopped because millions of people think their credit history will prevent them from getting a student loan. Most loans are issued based on what is on a person’s credit history and their credit score. For people with poor credit or no credit, the idea of getting a loan is impossible. Many of these people don’t realize that student loans are similar to traditional loans. The differences in traditional loans were created for those that have little, poor or no credit.
Federal Student Loans for Students
Federal student loans are different than traditional loans in many different ways. Federal student loans are backed by the government and offered through approved colleges and universities. The most popular of these loans are the Stafford and Perkins loans. The money for these loans are provided by the government.
The amount loaned to applicants is based on the amount of need they have. Those that have greater financial need than others will get more money. Students that don’t have a huge financial need will get smaller amounts because many times, they have other resources available to them to finance their college education.
Students that apply for a Stafford or Perkins loan will find they are not subject to a credit review as they would be if they applied for a private loan. Because the loans are backed by the government, the requirements are minimal to get these loans. If lenders look at a student’s credit, it is only to ensure they are not in default on an existing student loan. Once that has been verified, the loan will be issued for those that are approved.
Federal Student Loans for Parents
Students that don’t qualify for a lot of student loan money on their own can ask their parents to apply for a student loan on their behalf. These loans are called Plus loans or Parent Plus loans. These loans are processed much like a traditional student loan. These loans are also backed by the federal government. These loans aren’t based on a parent’s credit history but they do consider the financial need of the student and parent.
Repayment of All Federal Student Loans
While the processing and approval of federal student and parent loans are different than traditional loans, the requirement for repayment is the same. Any federal loan that is granted must be repaid. There are many repayment options to help those that are struggling to repay their student loans that make it easier to repay those loans.
What is shocking to many is that their student loans can’t be easily dismissed as personal loans can be. There are some that think if they declare bankruptcy, they won’t have to repay their loans. Student loans aren’t dismissed by bankruptcy cases under any circumstances. There are very few ways that people can have their student loans dismissed and those circumstances are hard to apply for and be granted.
While student loans are wonderful to apply for and help students immensely, they can’t be ignored. Students and parents that apply for these loans must repay them. As they repay their loans, their credit reports and scores will reflect their timely payments and greatly improve their financial futures as well.