This post was written by Gretchen Kernbach of Uloop.
Acquiring a loan as a college student, meaning you probably have a nonexistent credit history, can be difficult. Even though no credit history is better than a negative one, the difference is not that big.
However, there are ways to borrow money without having to have that perfect credit score. The first step is to look into the FAFSA.
What is the FAFSA? FAFSA stands for Free Application for Federal Student Aid.
The FAFSA uses information about your family’s financial situation to determine your Expected Family Contribution (EFC). The EFC is used to figure out your college financial needs, or Student Aid Report (SAR). For more information, check out our video course.
The colleges you wish to attend receive your SAR and decide which financial aid you receive, including loans.
Submitting the FAFSA leads you to numerous opportunities for loans. Some loan programs require payment, while others do not. Before you commit, read the fine print! The FAFSA serves as an entryway to financial aid: without going through the FAFSA gateway, you cannot get the financial assistance you need.
Finished with the FAFSA? You are now eligible for Stafford Loans, or loans offered by the government for undergraduate and graduate students. Two options exist with Stafford loans: subsidized and unsubsidized.
Eligibility for Stafford loans depends on your household income, and your school will determine which loans you are qualified for.
The Stafford Loan is the first option to consider after going for scholarships, due to “rates and repayment policy.”
The government pays the interest part of subsidized loans while you go to school and during the loan repayment grace period. However, you are in charge of paying off your remaining debt when the repayment period starts.
On the other hand, unsubsidized Stafford loans require you pay your accumulated interest during school, deferment, and the grace period. It is possible to borrow both types of loans, as long as you do not exceed the maximum amount allowed.
Overall, the reason for informing you about this kind of loan is that it does not require a credit check; therefore, no credit, no problem.
Another type of loan you can apply for without having to submit a credit check is the Perkins loan. For both undergrads and grads, the federal government also offers this loan. This loan is for students with high financial need.
Be sure to note that not all colleges participate in this program so check beforehand. In addition, the earlier you file your FAFSA the more likely you are to be issued some money, as it is on a first-come first-served basis.
Overall three factors influence your chances of getting a Perkins loan: time of application, how much you need, and the sum of funding available. Right now the interest rate is 5 percent.
Individual states like Minnesota administer state loans specific to their boundaries. For example, Minnesota offers residents and non-residents attending school in Minnesota a type of loan they call SELF loans, which offers up to $10,000 annually.
An alternative for not having your own credit is a cosigner. This person shares responsibility for the debt, allowing you to sign up for loans even if you, personally, do not have any credit. According to Wall Street Journal, over 90% of private student loan borrowers will need a cosigner.
Bringing on a cosigner allows you to borrow more. However, if you cannot pay back the loan, the cosigner will be accountable for doing so. So it is not entirely fair to throw him or her under the bus, as this person will probably be a parent or relative.
If you cannot provide a cosigner, then pay attention to the loans that do not require a credit check (as I have already mentioned a few above). Vice versa, if you can provide a cosigner then venture out and look for more available student loans.
Author: Jeff Gitlen
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