If you are a parent of a soon-to-be college aged student, and you have bad credit, you might be worried that it will affect your ability to pay for your child’s college education.
With a low credit score, the rate at which you receive a loan, how much money you can borrow, or even receiving a loan at all may be limited.
But even with bad credit there are a few ways you can set your child up for success and pay for college.
Yes, You Can Still Take Out a Loan
While your options may be limited, yes you can take out a loan when you have bad credit.
You can consider taking out federal or private student loans, and you can take out two if you and your child file as separate borrowers. As a parent, your credit score will only be taken into account on the loan under your name.
There are organizations that are willing to work with borrowers with bad credit, but be sure to read the fine print before signing on the dotted line.
Private loans do check your credit before granting a loan, but some will allow a co-signer on the loan, who would be held responsible if you defaulted on the loan. A grandparent or other trusted relative or friend could be a good option as a co-signer, if they’re willing.
Another good option is federal loans. When applying for a federal loan, your credit score is not actually taken into account. You will have to fill out your FAFSA, though, which takes into account your income and assets.
Look Into Tuition Discounts and Scholarships
Depending on the school your child plans to attend, your child may qualify for tuition discounts, grants, or work-study programs. There are also scholarships from either the school or that they can apply to receive from local organizations.
Start by checking with the school your child plans to attend. The school will often offer need-based financial aid, and they’ll use your FAFSA form to determine this. Then, look into scholarships based on merit that your child may be eligible for.
Merit based scholarships are purely based on your child’s achievement, not income. Schools will often require you to submit a one-page application to be considered.
Private merit-based scholarships may require more, such as essays and a questionnaire. While it does take more work, if your child is a high-achiever, these extra scholarships can be key to helping your family afford college.
Also ask your local high school if there are any scholarships your student may qualify for.
Don’t Borrow More than You Can Pay Back
While you may want to help your child attend his or her dream school, spending more than you can afford on college will likely only hurt your credit score further.
By borrowing more than you can afford to pay back, you may default or go further into debt, therefore decreasing your credit score.
It’s important to have a conversation at the beginning of the college application process about what colleges you and your family can actually afford and the plan to pay for them.
Paying for College Yourself with Bad Credit
If you’re the student and the one shouldering the cost of paying for college, you too can still pay for your education.
Look mostly into federal loans, where your credit is not taken into account, and take the time to apply to merit-based scholarships that can help supplement the cost.
