The process of procuring a student loan can be time-consuming and complicated. Before you can apply for one of these loans, you'll need to fill out the Federal Application for Student Aid. Known as "FAFSA," this document will help your educational institution determine the exact amount of financial aid for which you're eligible. The means by which you'll procure this aid will depend upon your school's policies. In most cases, you'll receive certain awards or tuition reductions directly from your school. After these have been applied to your account, you'll be responsible for covering your outstanding tuition costs. Most students use a number of different sources of funding to accomplish this imperative. These include federal Stafford loans, Parent PLUS loans and private student loans.
Each type of loan comes with its own unique conditions. These may include strict credit-score thresholds and parental income requirements. If you have poor credit, you won't be unable to find affordable funding for your educational endeavors. However, you may find that you're unable to take advantage of certain options that might be available to students with excellent credit. Your eligibility for a given type of loan will be considered on a case-by-case basis.
For starters, your credit score will have little bearing on your ability to procure a Stafford loan. Since the Stafford program was specifically created to increase students' borrowing power, participating lenders are barred from using credit during the loan-application process. In fact, such a consideration would be superfluous. Since the federal government effectively acts as the cosigner of every Stafford borrower, these loans come with no danger of default. As such, they carry extremely low interest rates that never fluctuate in response to credit-score changes. Of course, becoming delinquent on a Stafford loan may hurt your personal credit score.
On the other hand, borrowers' credit scores can affect the availability and cost of Parent PLUS loans and "unsecured" private student loans. What's more, the cost of these types of loans can vary even in the absence of credit-score fluctuations. If you're planning on using either of these types of loans, you'll need to spend some time looking for attractive interest rates.
In order to reduce the total cost of your Parent PLUS and private loans, you may wish to find a cosigner. Your parents can cosign for any private loan that you obtain. Since they'll be the primary borrowers on your Parent PLUS loans, they may also need to find a third-party cosigner like a well-heeled relative.