With the cost of a college education skyrocketing, people are going deeper into debt than ever before to gain the tools necessary for a successful career. However, if you've experienced credit problems, it's natural to worry about how this will affect your efforts to go back to school or to help a child go off to college for the first time. This is especially true if you're enrolled in a debt management program.
Debt Management Programs
A debt management program, also known as a DMP, can be a life-saver if you fear you'll never get out of the vicious cycle of credit card debt. When you sign up for a debt management program, you'll receive reduced interest rates, enabling you to get out of debt as quickly as possible. You'll also know that at the end of the program, you'll be out of credit card debt for good. However, the fact that you're on a DMP is indicated on your credit report, and it can be hard to secure additional credit while on the program.
Financial Aid
Virtually all college students receive some form of financial aid. The different types of financial aid include scholarships issued by the school, grants provided by outside agencies, federal loans and private loans issued by banks. While most of these forms of aid renew annually, the policies regarding repayment differ significantly. Scholarships and grants do not need to be repaid, whereas federal and private loans must be paid back after the student graduates.
Credit Requirements
The good news about federal loans is that your credit isn't even considered when applying. Though these loans must be paid back, they are available to anybody who applies. The only exception to this is the PLUS loan, which only requires that you not have bad credit -- in this case, no defaults or nothing more than 90 days past due. Private loans, on the other hand, are approved in a similar fashion to conventional loans. A poor credit score will likely mean that you can't get a private loan. If you have a low credit score and you're co-signing for a child who is about to enroll in college, this could make him ineligible for the loan.
Debt Management Programs and Student Loans
The fact that you're in a debt management program has no bearing on your ability to secure a Stafford Loan, a Perkins Loan or any other type of federal loan. This also applies to a PLUS loan, provided you didn't have any significant setbacks before joining the program. Your status on the debt management program also shouldn't impact your chances of getting a private loan. If your credit score is good enough, the lender won't even look at your credit report closely enough to see that you're on a DMP. You should be able to secure any necessary financial aid you need, regardless of your being on a debt management program.
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