When kids reach college, most people do not have the savings to finance college education. So, as a solution, students and their parents get student loans. So you might think that most students do not have a credit history yet and it will be difficult for them to get loans. Well, the government has a solution to this problem.
What are the loans available for college students?
Student loans that do not require checking of the credit history would be a federal student loan. The most common of them would be a federal Stafford loan which a student can take out under his or her name.
Are federal student loans enough for college education?
It would really depend on the student`s course. What will happen is, if they do not have the funds to take care of their college tuition, they will be advised to contact their financial aid department. The financial aid department will assist them in applying for the loan. If the students need more money for their college they will take out new federal loans. Usually, there is a limit to up to what amount they can borrow and if this happens, students need to contact private student loan lenders for help.
What are private student loans?
When students are not eligible to take out federal loans anymore, this is their second option. Private student loans are offered by private lenders. Usually, it is more expensive to pay back than federal student loans and has limited options as to postponing payments while in school.
Does applying for a private student loan require a credit check?
Yes, this time it requires a credit check. If the student is not qualified, he or she will be asked to look for a cosigner to cosign for the loan. The selection of a cosigner should be a person who has very good credit. If the loan is approved, it will be the student, the main borrower, and the cosigner`s obligation to pay the loan.
Will it appear on my credit history?
Yes it will definitely appear on your credit history. If you have a private student loan and you come in a repayment status already or you have come to a point where you need to pay you loan back, all is reflected on your credit report as well as you cosigner`s credit report. So, if you fail to make a payment, and this will be reflected as a late payment, this will cause you and your cosigner`s credit history. So better be careful when dealing with loans with cosigners.