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Help! Parents Have Bad Credit--Can Our Daughter Still Get a College Loan?

Written by Sally Rubenstone | June 7, 2009

Question: My daughter just graduated from high school and needs a loan for college. My husband and I have horrible credit and cannot get a loan. Can she get one?

Assuming that your daughter can't find an adult co-signer with good credit (grandparent, aunt, uncle, etc.), she should talk to a financial aid officer at the college she will attend and explain her situation. (If she's reluctant, assure her that financial aid staff members are used to dealing with families in all sorts of predicaments, so she should feel comfortable explaining her own.) She will probably be told that you and your husband will have to apply for a PLUS loan. Then, when you are turned down for the loan (which sounds likely, based on what you've just said about your credit), your daughter can get a Federal Stafford loan .

I consulted a former college financial-aid honcho before responding to your query to get the latest figures (as of June 2009). She said that as a freshman, your daughter should be able to borrow up to $5500. If your income is low enough, the first $3500 will be "subsidized." The remaining $2000 is "unsubsidized" If you have been denied a PLUS loan, she can get an additional unsubsidized $4000. (Loans are either "subsidized," meaning that the government pays the interest while the student is in school, or "unsubsidized," meaning that the student must pay all the interest, although the payments can be deferred until after graduation.) The rate on the subsidized loans will go down to 5.6% on July 1, 2009, but the unsubsidized portion will still carry a fixed rate of 6.8%.

The financial aid officer at your daughter's college can give her more information about how to proceed. Note, however, that these loans are only for US citizens or Permanent Residents. So, hopefully, your daughter is not an international student.

Sally Rubenstone

Sally Rubenstone knows the competitive and often convoluted college admission process inside out: From the first time the topic of college comes up at the dinner table until the last duffel bag is unloaded on a dorm room floor. She is the co-author of Panicked Parents' Guide to College Admissions; The Transfer Student's Guide to Changing Colleges and The International Student's Guide to Going to College in America. Sally has appeared on NBC's Today program and has been quoted in countless publications, including The New York Times, The Washington Post, USA Weekend, USA Today, U.S. News & World Report, Newsweek, People and Seventeen. Sally has viewed the admissions world from many angles: As a Smith College admission counselor for 15 years, an independent college counselor serving students from a wide range of backgrounds and the author of College Confidential's "Ask the Dean" column. She also taught language arts, social studies, study skills and test preparation in 10 schools, including American international schools in London, Paris, Geneva, Athens and Tel Aviv. As senior advisor to College Confidential since 2002, Sally has helped hundreds of students and parents navigate the college admissions maze. In 2008, she co-founded College Karma, a private college consulting firm, with her College Confidential colleague Dave Berry, and she continues to serve as a College Confidential advisor. Sally and her husband, Chris Petrides, became first-time parents in 1997 at the ripe-old age of 45. So Sally was nearly an official senior citizen when her son Jack began the college selection process, and when she was finally able to practice what she had preached for more than three decades.