Students who are still in need of financial assistance or who are looking at future college semesters may be in a unique position where loans are not simply required for them to meet certain college costs but there may be a bad credit score that needs to be overcome in terms of exploring financing options from federal or private loan choices. Borrowing student loans is incredibly common and has led to a great deal of debt when it comes to graduates having to repay this financial aid source that can help them meet rising college costs, but when a student or their parents happens to be in a bad credit situation, this could change the borrowing opportunities that may be available.
Obviously, financial aid counselors often suggest that students or parents do a great deal of research when it comes to scholarships and grants so loans can be avoided entirely. While there are numerous types of financial aid options that may be available, some individuals are simply in a position where they cannot find the funding they need from these resources and since college costs are on the rise, loans have become a necessity for some before their financial aid needs can be met entirely.
However, both students and parents may have seen that certain private banks are beginning to compete in the area of student loans, as there are some lenders who are offering benefits, perks, and even fixed interest rates on student loans. This is where some students or parents may be able to compare whether a federal or private loan will be best for their situation, yet if a bad credit score is in place this could make borrowing or even refinancing with a private lender more complicated.
There are some counselors who feel that private loans should be the absolute last option that a student chooses, but since there are some major banks and even smaller financial institutions that are beginning to offer competitive loan opportunities that will hopefully allow them to offer both options comparable to federal loans, students must be careful as these rates on private loans could be much higher. It also goes without saying that if a parent or student happens to be in a poor credit position, as a result of factors like unemployment, these costs may also be much higher for private loans and there are other downsides as well.
Currently there are many students who are deemed nontraditional, meaning they are not entering college right out of high school, but may be entering college after being in the workforce for quite some time but have also seen our current unemployment problem limit their number of job opportunities currently available. Some individuals are returning to school to retrain, earn a college degree for the first time, or further any current degree they may have but there are also some students who are entering college right out of high school but need financial assistance that may come from parental loans.
In either case, a bad credit score may be a factor as a result of either unemployment or poor financial practices, but federal student loans often offer the best rates and borrowing opportunities for individuals in these bad credit positions. Yet, even if parents and students in a bad credit position explore private loan options and find that they can offer competitive rates, it needs to be remembered that students must look beyond borrowing and see whether there are any assistance options available when it comes to repaying these debts that may be similar to repayment programs that are available from federal loans if a student graduates and has a difficult time repaying their federal loans.