Where is the Best Place to Get a Student Loan?
Can I Consolidate My Student Loans While I’m Still in School?
Can a Student Loan be Used for Outside Expenses as Well?
My Federal Student Loan Doesn’t Cover the Entire Cost of My Education
Student Loan Lenders Dropping Like Flies
Can I Get A Student Loan For My High Schooler?
Should I Let My Student Loans Go to Collection?
What is Student Loan Consolidation?
What is the best strategy for paying off a student loan with high interest?
Although it seems like a simple yes or no would suffice, the answer to this question runs a lot deeper than that. There are two different types of student loans: federal and private. Your credit score plays a different role depending on what type of student loan you are after.
There are two federal student loans directed at students, the Stafford federal student loan and the Perkins federal student loan. The Perkins student loan is for students in need of financial aide, the ones that can’t possibly afford to pay for school by themselves. Since students applying for these are most likely from a lesser income anyway, a credit check is not done. The Stafford loan is for any student, you don’t have to be in need of financial aide to apply for it. Since the Stafford loan is for students, and students usually have little to no credit history, a credit check is not done. If you are a student applying for either the Stafford or Perkins federal student loan it does not matter what your credit score is because a credit check is not done.
This loan, aka PLUS, is for parents who are paying for their child’s education. Since the parents are paying for this loan their credit history comes into play. When applying for the PLUS your credit score will not determine whether you get it or not. The only factors that are looked at are delinquency on a payment or a default on a loan. If you have trouble playing off your loans then you won’t get approved for the loan. If you are a parent and can’t get approved for a loan for your child, then you may have to have your child apply for the Stafford or Perkins loans.
Private student loans are where credit score plays the biggest role. If you have a federal loan and you stop making payments, the federal government will pay off the rest of the loan to the lender. There are no such assurances for lenders when it comes to private student loans, therefore they will be treated just like any other loan. Your credit score will affect if you get approved for the loan and how much your interest rate will be.
If your credit score is low your best bet is to go for a federal loan, if you are a parent. If you are a student your credit score won’t matter. However, with more competition the better rates you may be able to get in private loans today. There are also other options, like taking out a home equity loan.
