Many college students enter a college or university for the first time or return after after a period of absence and, due to certain circumstances, these students may have a bad credit score but need financial assistance to help meet college costs. While the majority of college students may not have a bad credit score necessarily, there are those who may simply have little to no credit history and there are many who are concerned that funding from sources like student loans may be unavailable.
However, bad credit student loans have been available for college students for quite some time. While private student loans do often require a credit check and may be unavailable to certain individuals who have a low credit score, federal student loans often do not factor a student’s credit history or score into the equation when lending.
Federal student loans can be made available to bad credit borrowers but federal student loans do put a cap on the amount one can borrow each year. A bad credit borrower may be able to obtain the funding they need for their college costs through federal student loans but the maximum amount a student can borrow will be dependent upon their class rank in college. This, typically is done to minimize risk taken since it is seen as more likely a student will repay their student loan debts if they continue their education, so they can be awarded higher amounts later in their educational career.
However, many are concerned that bad credit borrowers may be putting themselves in a bad position by acquiring debt in a bad credit situation. Individuals who have a bad credit score as a result of poor financial practices may do more harm to their credit history if they add to their financial situation by acquiring student loan debts. Obviously, students who have outstanding debts will want to avoid student loans but individuals who have a poor credit score but no debt in their financial life may benefit from student loans as repaying this financial obligation in a timely manner could help one’s credit score by building a better credit history.