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How to Get Student Loans With Bad Credit

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Young woman sitting on steps next to a backpack and books with her head in her hands

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Many people have no choice but to take out student loans in order to afford college. If you’re one of them, but your credit is poor, you may be wondering if you’ll qualify to borrow money to fund your degree. The good news is that it is possible to get student loans with bad credit, but in some cases, you’ll pay the price for those loans further down the line.

What’s considered bad credit?

The lower your credit score, the more challenges you might encounter on the road to qualifying for student loans (or any type of loan, for that matter). Credit scores range from a low of 300 to a high of 850, which is considered perfect credit. A score that falls between 300 and 579 is generally considered to be very poor. If your score is somewhere in this range, you may have difficulty getting approved to borrow money for college, although that won’t necessarily be the case. 

Why might your credit score be so low? If you’re applying for student loans directly out of high school, then chances are you haven’t yet had an opportunity to establish a solid credit history. And if you’ve never had any bills in your own name, it’s hard for lenders to determine how responsible a borrower you are.

Now, if you have had bills in your name, but you also have a history of paying them late or, worse yet, not paying them at all, then that can easily bring down your credit score, too. Similarly, carrying too much debt at the same time could move your credit score into unfavorable territory, thereby making it harder to borrow money for any purpose, college included. 

Getting student loans when your credit is bad

Having bad credit won’t necessarily prevent you from getting approved for student loans. Here are a few ways to snag those loans even when your score is unquestionably poor. 

1. Apply for federal loans

Federal student loans are those issued by the U.S. Department of Education, and there are many benefits to taking them out for college. First, federal loans are regulated so that their interest rates are capped at preset levels, making them much more affordable than private loans. Federal loan interest is also fixed, so you don’t run the risk that your rate will rise over the course of your repayment period. 

Additionally, federal student loans come with certain borrower protections that can make repaying them easier. For example, if you have trouble keeping up with your loan payments after college, you can apply for an income-driven repayment plan, which will set your payments as a reasonable percentage of your income. You may also qualify to defer your loan payments for a period of time if you’re in the midst of financial hardship.

Another great thing about federal student loans is that they don’t require a credit check, which means that even if your credit score is terrible, it won’t matter. To apply for federal loans, you just fill out the Free Application for Federal Student Aid, or FAFSA.

2. Get a cosigner and borrow privately

Private student loans are trickier to qualify for than federal loans because they do require a credit check. They also tend to charge higher interest rates, and their interest rates are often variable. As such, they’re generally much more expensive to pay off. And since they don’t offer the same built-in protections as federal loans do (such as income-driven repayment plans, and deferments), they’re generally less desirable. 

Now you may be thinking: “In that case, I’ll just stick with federal loans.” 

It’s a good plan, but unfortunately, federal loans come with borrowing caps, so you can only borrow so much on the cheap. At present, that cap is $31,000 in total for undergraduate students who are also dependents (except for students whose parents are unable to get PLUS loans). The average tuition cost at an in-state, four-year public college is $10,230 a year. So if you have no money at all to pay for college, even if you attend one of these and skip the dorm, federal loans won’t cover the $40,920 you’ll need for four years of tuition. Therefore, you may have no choice but to resort to private loans

Now, if you are going to borrow privately for college, your chances of getting approved on your own aren’t all that great if your credit score is really bad. Granted, you may get approved for a loan with a ridiculously high interest rate, but even that may not happen if your credit is truly abysmal. 

If that’s the case, then your best bet is to find a cosigner for your student loans. That person could be a parent, a sibling, another relative, or even a family friend. 

Finding a cosigner may not be so easy, though. When a person cosigns a loan, he or she agrees to be held liable in the event that you’re unable to keep up with your payments once they come due. Therefore, while you might manage to convince a parent to cosign a loan for you, it’s likely to be a hard sell in most other cases. 

Another thing to keep in mind is that your cosigner needs to have good credit for you to qualify for private loans with your bad credit. A good credit score is one that’s 670 or above. The higher your cosigner’s credit score, the greater chance you have of not only getting approved for private student loans, but snagging them at a more reasonable interest rate. 

3. Find a private lender that’s willing to take a chance on you

A limited number of private lenders offer student loans to applicants with bad credit, and don’t require a cosigner. Rather than determine your eligibility based on your current financial situation, your potential future income is taken into account when evaluating your ability to pay off your loans on schedule. If you manage to qualify for this type of private loan, keep in mind that it may come with an astronomical interest rate in exchange for that leeway.

Alternatives to explore

Although it is possible to get student loans with bad credit, you may not secure enough financing in federal loans to fund your entire education, and you may not like the idea of getting a cosigner, or locking yourself into a loan with a ridiculously high interest rate attached to it. If that’s the case, then there are a few alternatives you might look at.

First, you can work on building your credit. Doing so won’t happen overnight, though, so you may need to postpone your studies for a semester or two to get your credit on track. But if you’re willing to go this route, get some bills in your name and start paying them on time and in full. You can also get a secured credit card and establish a credit history by making payments on that account in a timely fashion.

Once your credit score is in better shape, you can apply for private student loans again and see what rate you’re eligible for. The higher your credit rating, the lower your rate is likely to be.

Another option to consider? Delay your studies, work for a year or two, and then go back and apply for federal loans. If you manage to bank your earnings during that time, you may have enough money between your savings and federal loans to avoid costly private loans. And remember, your credit score doesn’t come into play with federal loans, so even if it doesn’t improve during that time, federal loans are still on the table. 

Refinancing your student loans after the fact

If you have no choice but to take out private student loans for college, and you get stuck with a lousy interest rate because of your bad credit, you can always refinance that debt once you start working and establish a stronger credit score. Refinancing is the process of swapping one loan for another, and it’s common practice among people with student debt.

Let’s imagine that you took out private loans that came with a 15% interest rate (which is pretty bad). You may get stuck paying at that rate for a year or two after college, but if you then work on building your credit, you can explore your options for refinancing once your score is in better shape. At that point, you may end up qualifying for a new loan at 8% or 9% interest, which will lower your monthly payments and make them much easier to keep up with. 

Clearly, you can borrow money for college even when your credit is bad. If you’re able to cover your borrowing needs via federal loans only, you’re in good shape. And if you’re forced to take out private loans, that may be an option, too. Just be aware that you’ll likely need a cosigner, and that you may get stuck with a higher interest rate that makes paying back your debt more difficult down the line.



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COVID-19 Infects Financial Stability, But Chronic Low Wages Are The Culprit

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The Federal Reserve found in 2019, 37 percent of adults saying they could not cover a hypothetical expense of $400 with cash, savings, or a credit card, instead, they might turn to Payday lenders who can charge up to 400% interest for a two week loan, according to the Consumer Financial Protection Bureau. What’s their Pay-Day loan collateral? The wages and salary the employer has yet to pay. Workers may have to pay up to 400% interest for access to wages and salaries they earned, but have not yet received.

Remember that sinking feeling when you first started work? You might have even wondered why the employer didn’t pay you first. A bi-weekly paycheck means you work for two weeks before getting paid. For those living paycheck to paycheck, this two weeks can put you behind with bad credit and high interest rates and credit card fees.

Though many gig workers want the benefits, union access and labor rights afforded to regular employees, being paid instantly is a substantial perk to a gig. At least one company, Ceridian
CDAY
a global human capital management technology company – may have a partial solution to the payday loans and liquidity problem of “more month than money.” They seem to be having some success convincing their clients that those who work for them want the option to be paid like day laborers.

The company offers a product which allows employers to pay their employees at the employees’ request before pay day. It is not an advance, but rather payment for work already done. Some employers like it. “When you work in a call center, there are some things that aren’t very flexible. We need employees at their desk, on the phones making calls…” said an official for Crescent Bank (via Ceridian’s public relation’s center). “We can’t offer a ton of flexibility with attendance, [but] we can provide a benefit that other shops are not offering,” he said referring to Ceridian’s product.

Employees might be attracted to employers who offer this option, because faster pay could solve a low liquidity problem. Ceridian commissioned a Harris poll survey of 2,070 U.S. adults ages 18 and older — 1,158 who are employed — for three days starting October 19, 2020. The findings (not posted but sent to me privately upon request) are similar to the Fed’s study, one-third of Americans do not have enough saved to cover monthly groceries. This cash poor situation also creates uncertain futures. The Federal Reserve finds only 37 percent of non-retired adults think their retirement savings are on track, while 44 percent think it is not and 19 percent are unsure.

Older Americans tend to have more savings for monthly groceries. 86% of respondents 65 and older report having the required savings compared to 50% of 18–34 year olds. This may say more about the number of years they’ve had to save than their real stability. Older Americans are not out of the woods.

In an ideal world, a near-lifetime of work would afford every older household a financial buffer to cushion a blow to income or health. Most try to have some savings and reasonably priced credit lines in case of unexpected medical bills or joblessness. But in the not-so-ideal world we live in, millions of older households do not have cash savings or other liquid assets to make up for multiple months of lost income.

As a result, financially fragile older households are more at risk of depleting their retirement savings to make ends meet, as evidenced in the current Covid-19 recession. When these households retire — or are forced into retirement—they will have less retirement income and will face downward mobility in the last years of their lives.

STAGNANT WAGES CAUSE FRAGILITY

Most financial fragility is caused by low pay, not the frequency with which low wages are paid. According to the Economic Policy Institute, wages have stagnating over the last 40 years (disclosure: I sit on the board of EPI). “From the end of World War II through the late 1970s, the U.S. economy generated rapid wage growth that was widely shared,” the institute reports. Since 1979 average wage growth has slowed sharply, with the biggest declines in wage growth at the bottom and the middle.

Low wages and the ensuing financial fragility are the result of eroding unions and worker power. Workers no longer have the political clout they once did. And so over the past 40 years, they have only been able to achieve weak and sporadic increases in the minimum wage. These minimal increases have not been enough to keep up with inflation. The real value of the federal minimum wage (currently at $7.25 per hour) has dropped 17% since 2009 and 31% since 1968 (adjusted for inflation). This amounts to about $6,800 less per year for a full-time worker making the federal minimum wage today than for their counterpart 50 years ago.

It’s unlikely employers using products such as Ceridian’s will be able to solve the financial fragility problems of the U.S. That problem stems from 40 years of stagnating wages and waning worker power. In other words, it’s not an issue of how often, but rather how much employers pay their workers.

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A Look Back At Housing 2020: Relief, Reality, And Rationality

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National Geographic has a series called Seconds From Disaster that, according to it’s website, uses “ Advanced computer graphics, forensic science, eyewitness accounts, interviews with experts, archival footage and re-enactments [to] piece together in great detail the events that led to some of the biggest disasters of modern time.” My last few posts remind me of the series; the housing market in the United States really is seconds from disaster at least figuratively. What can stop this from becoming a disaster of government run and rationed housing? The answer is relief, reality, and rationality.

Relief

It’s simple. When you tell people they can’t go to restaurants and bars those businesses can’t make any money and they lay off employees. When those employees don’t get a paycheck they can’t pay rent. Assuming that this intervention – shutting down the economy – is the right thing to do, wouldn’t it make sense to help the people most impacted by replacing some or all of that lost income?

Instead, what government has done is ban eviction. That makes no sense. If people needed food, you wouldn’t advise the suspension of shoplifting laws so people could help themselves to groceries at the local market, you’d get them cash for groceries or you would distribute them to people in need. As I’ve already pointed out, eviction bans are a time bomb of unpaid rent.

Government can solve this problem by having lenders give fast cash to housing providers who have residents with unpaid rent. It would be a forgivable loan and could be settled up in the months ahead with rent rolls and balance sheets submitted and a promise not to try and collect back rent if a loan is made. The wrong thing to do would be to have government distribute the relief; government isn’t set up to give out money, banks are.

Reality

Marriages, car loans, and businesses arrangements sometimes fail. Courts exist to adjudicate disputes that arise when transactions don’t work out. Eviction is no different. The vast majority of rental relationships between housing providers and their customers work out fine. Sometimes there is friction. Sometimes the housing provider is a bad actor. Sometimes the resident is. Housing providers don’t make money by evicting people any more than a bar makes money by throwing out its customers.

Contrary to the hype, eviction is rare in the United States and when it happens it is very expensive, complicated, and usually resolved without a sheriff putting the contents of a rental unit on the sidewalk. I did an analysis of hyped eviction data from Seattle and the actual removals in one year were vanishingly small, just .7 percent of all rental housing. How many of these 1,200 removals were because of bad actors? How many were the product of lost jobs? We don’t know because that data isn’t tracked. What’s important is eliminating the causes of eviction; especially poverty, mental health issues, and addiction all issues that when combined do lead to serious issues that impact housing. Making eviction more difficult helps eviction defense attorneys not residents short on cash or having complex problems.

Rationality

Maybe it’s not the best or the right term, but most human beings are rational actors in any economy. If prices go up, people find substitutes for products with higher prices. If they can’t find a substitute, they make due and change their lives around to get what they need. At the same time, producers strive to get a product to market that meets consumer demand at a lower price. This isn’t ideology it is how the world works. Price sends important signals to people on how to behave, innovate, challenge the status quo, and propose changes. Price isn’t a bad thing it is our best friend.

When housing prices go up, yes, it is because there isn’t enough. I’ve heard very smart people – much smarter than me – dispute this. “It is much more complicated than that,” they say. Well, it isn’t. It is that simple. Smart people don’t like three piece puzzles or crosswords with simple clues. Why go to Harvard or Yale or start a lab at Princeton if housing problems were so simple I could solve them. It’s this kind of lens through which government and experts survey the “housing crisis.”

Avoiding Disaster

A loftier image I often use is that of the Trojan horse, one that has become a trope for ignoring the obvious. Take people’s income away for a good reason then replace that income. Want to avoid the consequences of poverty – like bad credit, evictions, and housing cost burden – work to eliminate poverty. And if you want people to solve problems creatively, get out of their way; they can usually figure out the solution and if you can help, do it.

The fact that housing is a commodity is not the problem. The housing problem is worsened when government and non-profits decide to get in the way of buyers and sellers of housing with rules intended to protect consumers but instead become a proxy for incumbents who see their equity rise with limited supply. We should not subsidize that self imposed scarcity; instead we should encourage more housing everywhere of all kinds for people of all levels of income.

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Maryland Auto Insurance review 2020

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Formerly known as Maryland Auto Insurance Fund, Maryland Auto Insurance was created by the state of Maryland to keep the state’s drivers on the road legally. They offer a transitional solution to uninsured drivers in Maryland and will not turn anyone away, especially those who have a poor credit history, are high-risk drivers and have been denied coverage from other providers.

To help you decide if they are the right provider for you, we have broken down all the details about the types of insurance it offers, available discounts to help you save and how it differs from other providers in the area.

Maryland Auto Insurance

Maryland Auto Insurance provides a broad range of coverages and discounts to meet most driver’s unique needs.

Types of Coverage

The company’s standard car insurance policies cover the minimum amount of insurance required by Maryland law, including:

  • Liability: The minimum amount of liability coverage required by Maryland Law is $30,000 for bodily injury per person, $60,000 for bodily injury per accident and $15,000 for property damage per accident.
  • Uninsured motorist: The minimum amount of uninsured motorist coverage required by Maryland law is $30,000 for bodily injury per person, $60,000 for bodily injury per accident and $15,000 for property damage.
  • Personal Injury Protection (PIP): Maryland law requires insurers to offer their policyholders at least $2,500 in PIP coverage.

The provider will not deny coverage to anyone, as long as they:

  • Are a Maryland resident
  • Own an automobile registered in Maryland OR have a valid Maryland driver’s license
  • Have been canceled or not renewed by a standard insurer for a reason other than non-payment of premium OR have been refused insurance by two (2) standard insurers
  • Do not owe Maryland Auto any unpaid premium.

It also offers additional coverage options like:

  • Collision
  • Comprehensive
  • Towing
  • Rental Car

Cost of Maryland Auto Insurance Car Insurance

Maryland Auto Insurance determines premiums based on risk level, vehicle type, driving experience, location, amount of coverage needs and several other factors. Consumers can request a personalized quote on their website.

One thing that differentiates this insurance provider from others is that they do not factor in credit history when determining the premium, which can help those with bad credit save money.

On average, Maryland drivers can expect to pay the following depending on their insurance coverage selections:

Minimum Coverage Full Coverage
$1,278 $3,764

Discounts

Because this provider is a transitional option designed for drivers who can’t get insurance elsewhere, there are few discounts available. However, they do offer some ways to save money on an auto policy.

Reasons Why Maryland Auto Insurance is a Great Option

Maryland Auto Insurance is a great provider for those seeking coverage after being denied elsewhere, especially those with bad credit or no credit history.

The company also provides great coverage options for high-risk drivers, including Uber and Lyft drivers, towing and rental cars. However, due to their commitment to covering higher-risk individuals, the cost for coverage can be a bit higher than other providers in the region. Be sure to shop around to determine whether or not Maryland Auto Insurance is the best auto insurance provider for your needs.

Due to Maryland Auto Insurance being a nonstandard transitional provider, all applicants must prove at least two other standard insurers have denied them to qualify, so keep that in mind before requesting a quote.

Maryland Auto Insurance Ratings, Reviews, Customer Satisfaction & Complaints

Because Maryland Auto Insurance is not a standard insurance carrier, information about their financial strength and customer satisfaction is pretty limited. However, there are a few resources customers can refer to when determining the company’s customer satisfaction:

  • Better Business Bureau: The company currently is not accredited by the Better Business Bureau (BBB), nor does it have a BBB rating. However, some interesting insights can be gained from customer complaints. Namely, the company appears to be slow to respond to claims requests, especially when handling claims for people who have been involved in an accident with one of their clients.
  • Google: According to their Google My Business listing, the company has 165 reviews and a 2.3-star rating. Again, most of the complaints are from drivers not insured by Maryland Auto Insurance who have been involved in accidents with one of their insured drivers.

Additional Policies Offered by Maryland Auto Insurance

In addition to regular auto insurance, Maryland Auto Insurance offers policies for Uber and Lyft drivers, motorcyclists and scooters and other low-speed vehicles. It does not offer coverage options for homeowners, renters, life insurance or any other type of insurance product besides motorized vehicles.

Frequently Asked Questions

What is the best auto insurance company?

The best auto insurance company is different for everyone and is largely based on personal preference. It’s a good idea to shop around and compare rates from different carriers, then speak with a licensed insurance professional.

What do I need to get a quote from Maryland Auto Insurance?

Receiving a personalized quote from Maryland Auto Insurance is simple. First, you’ll need to be prepared to prove that you are a Maryland resident, possess a Maryland driver’s license and have at least two previous denials from other carriers. Then you can request a quote online.

How do I file a claim with Maryland Auto Insurance?

Maryland Auto Insurance offers 24/7 claims assistance through their online portal and via telephone. Customers can visit their claims reporting service online to file their claim or dial 800-492-7120 to get assistance.

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