What is a Good Credit Score for a School Loan 2015A good credit score is required for school loan, at least to get low interest rates and low fees associated with it. In case you plan to take loan from private lenders than it becomes more important to have good credit score to be eligible for attractive interest rates.
There are many options to avail student loans. Of course it depends upon your family income and in what tax bracket you file your taxes. In addition to federal, state and private school loans , there are some charities which offer student loan or grants to deserving and need based students.
Now the question is 'how do you qualify for Federal Student Loans' and do they use credit scores to evaluate student loan application? Let's understand what types of Federal programs are available for student loans and what are the required requirements
The student loan program come in many packages some from government and state initiated programs and some from variety of private lenders.
Federal Student Loan ProgramThere are several types of education loan programs available for which students may be eligible. The Stafford and Perkins loans are federal governed loan programs. These two programs directly give loan to the student. Both Stafford and Perkins loans are funded by government and thus carry low interest rates and have very consumer favorable loan repayment plans. The federal loans are savior for lower middle segment people who otherwise can't afford to send there children to the colleges they want.
Federal Stafford Loan Program: The money for Stafford loan program comes from a federal government program called FDSLP, the acronym stands for Federal Direct Student Loan Program. The Stafford loan to student is provided under two categories, subsidized and unsubsidized. The difference is in the interest rate on loan under each of these subsidized programs and the loan cap they carry.
Subsidized Stafford Loans: The beauty of subsidized Stafford loan program is that you won't make any payments until you graduate. The interest rate on subsidized loan are very low. The government will pay for your interest while you are in school finishing your school term. This type of loan program is reserved for students who can furnish proof for family hardship. The families which earn less than 50k or 60 k usually qualify for this loan program. This loan program doesn't use credit score to evaluate loan application. For more information on Stafford loan program , visit Federal Student Aid.
Unsubsidized Stafford Loans: There are two difference between unsubsidized and subsidized Stafford loan. First the interest rate on the loan is not free while you are in school, actually it gets accumulated into your loan. The loan payments get deferred till you graduate. The interest rates are fixed and current rate is around 6.8%. The unsubsidized Stafford loan program is open to every student regardless of their family economic condition. For more information on Stafford loan program , visit Federal Student Aid.
Federal Perkins LoansThe Perkins loans are available through federally funded loan program. The Perkins loan is low interest loan available to both undergrad and grad students with exceptional financial requirements. Most of the student like Perkins loan program over the Stafford loan program because of its low interest rate and favorable consumer terms. Here is the brief snapshot of Perkins loan program.
Overview of Federal Perkins Loan
- Loan program is available to undergraduate, graduate, and professional students with exceptional financial need.
- The loan program carries low interest rate (5%)
- Important thing to check with you school, if they participate in Federal Perkins loan program
- School act as lender and you will make payments to your school.
- Funds availability is need basis.
- Perkins loans are subsidizes
- The government pays any interest accrued while you’re in school and even you get short grace period after you graduate.
- Perkins loans are popular because of favorable terms
- The cap limit for undergrad is around 30k and for grad is 60k.
- No credit check or credit score evaluation is done for loan application.
For more information on Perkins loan program visit Student Financial Aid.
Federal Plus LoansThe PLUS loans are federal loans that are available to graduate students and to parents of dependent undergraduate students. This is US government program and they make direct loans to eligible borrowers through the participating schools.
- The U.S. Department of Education is the lender.
- The borrower must not have an adverse credit history. so not your credit score but your credit history is important such as any missed payments over 90 days. The other things which matter are bankruptcy discharge, repossession, tax lien, foreclosure, wage garnishment etc.
- The maximum loan amount is the student’s cost of attendance (determined by the school) minus any other financial aid received.
- They have a fixed interest rate of 7.9 percent.
Private Student Loans:Why do Private Student Loans use Credit Scores? Lenders in business of lending educational loans use credit score to determine the creditworthiness of a loan applicant. The credit score helps lenders understand and determine the risk level each applicant carries and how likely or unlikely he or she will default on a given loan. Now, if you are planning to take loan from a private lenders, then it is important you browse through your credit report and check for any errors it might have. Sometime by removing errors your credit score can jump few points. Additional you can look into the ways to improve your credit score before you actually apply for student loan.
The educational lenders provide loan under various interest rate program. The best loans may comer only 20% of loan applicant with good credit scores. The more lower credit score the more interest rate rises. One can easily conclude that there will be difference of 2 o to 3% interest rate between the low credit score and good credit score loan applicants. It is advisable to check your credit report early on and look for errors and ways to improve your credit score. You don't have to spend money to get your credit report, the Annual Credit Report provides you one free copy of your report for each of three credit bureaus. Visit Annual Credit Report.
Free Credit Resource informationAnnual Credit Report website provides free credit report to consumers. This is mandated under federal law that credit bureaus should provide once a year a free copy of credit report to consumers. The three credit bureaus Experian, Equifax and Transunion collectively created Annual Credit Report portal for consumers to access their credit report. Please remember , it is only once you get free credit report. Also you do not get credit score from Annual Credit report for that you have to visit each credit bureau to get your credit score.
Please note to get your free credit report you don't have to pay any charges and beware of any sites charging you for your free credit reports. In case you have exhausted your free option to get credit reports than next option is to visit individual credit bureaus to get your credit report and credit score. Additionally you can get 3 bureau credit report and 3-1 credit score from any of the credit bureaus for a charge.
Credit Bureau Details
- Free Credit Report:- Visit Annual Credit Report
- Equifax Credit Bureau:- Visit Equifax
- Transunion Credit Bureau:- Visit Transunion
- Experian Credit Bureau:- Visit Experian
- MYFICO credit score:- Visit MyFico.com