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Second Chance Student Loans

Second chance student loans offer a way for someone to afford a college education, even if you have bad credit, or little credit history. They typically have low interest rates, and have a very reasonable schedule of repayments. These loans are ideal for both younger or more mature students. If you are 18 and looking for a college loan, you will not have much credit history built up. And for mature students going back to school, you can still find good rates and terms for your student loans, regardless of credit.

There are two main types of student loans. They are the federal government and private lenders. Some state governments also provide loans to students, but not every state has this. For second chance student loans, it is best to look into options granted by the federal government. Private student loan lenders tend to charge higher rates, and are more strict in their requirements, often requiring a co-signer. However, private loans are very useful to many who find that federal student loans are not enough to cover the tuition and expenses involved for their college or post-graduate education.



Stafford Loan

Stafford loans are guaranteed by the federal government. Stafford loans are available to individuals regardless of financial need for so long as the applicant submits a properly filled out Free Application for Federal Student Aid (FAFSA) form. The applicant must also meet requirements on citizenship, residency, half time status, enrollment with the Selective Service (if male under 25 years of age) and does not fall within any of the disqualifications such as a previous unpaid federal loan.

Stafford loans are payable monthly for 10 to 25 years at 6.8% interest which starts 6 months from graduation. This type of loan may be subsidized. That means that they are available for students that show actual financial need. The government shoulders the interest payable while at school, on deferment and during the grace period. Unsubsidized loans are given to students who do not show financial need pays for interest the entire time but the same can be deferred upon application throughout the enrollment period.

Limitations on the amount to be borrowed are as follows:
Freshman: Maximum of $5,500 per academic year.
Sophomores: Maximum of $6,500 per academic year.
Juniors and Seniors: Maximum of $7,500 per academic year

Parent Loan for Undergraduate Students (PLUS)/ Graduate Direct PLUS

This loan is applied for by the parents and not by the student. PLUS loans are credit rating based, but based on the parents' credit, rather than the student. Even if you have bad credit, your parents may be able to help. This type of loan is available both for college education and graduate studies. For graduate students, the PLUS loan is applied directly by the student, not the parent.

What if you or your parents have bad credit? By way of exception, an applicant who does not have a high enough credit rating can piggyback on the credit rating of another as guarantor, usually a relative with an adequate credit rating. The payment terms of a PLUS loan is 7.9% fixed interest which starts 60 days after final disbursement but can be deferred upon application by a half time student.

Perkins Loans

Perkins Loans is a federal loan program that is reserved for students with the most obvious need for financial aid, regardless of their credit. The loan amount will be less than $4000 a year and $20,000 total for an undergraduate. The Perkins loan is available directly through schools that are participants of the program. It is made to both part-time (even less than half-time) and full-time students. You have 10 years to repay the loan. Payments are made directly to your school. The interest rate is a low 5%, and you have 10 years to repay.

Private Student Loans

There are private student loans offered by traditional banks like Chase, Citibank and Wells Fargo. To qualify for these loans, you will need to pass the banks' strict criteria for lending. So if you have bad credit, the only way around this is to find a co-signer for the loan. This provides a second chance to secure a student loan even if your personal credit is bad. This co-signer can be anyone, but usually a family member or close friend who is unafraid to help you with their good credit status. Private loans would also entail higher interest rates and fees.