Many students finish their education with loans still remaining to be paid off. They, therefore, end up with bad credit, and often with no credit at all. These students can avail of special bad credit student loans granted by the federal government. The interest rates on federal bad credit student loans are significantly low compared to that of personal loans and home equity loans. Bad credit student loans are also available from private lenders. However, their interest rates are generally slightly higher.

There are different kinds of bad credit student loans granted by the federal government. The federal Stafford loan is granted directly to the students. The interest rate is kept low, usually below 8.25%. There is a deferred period for repayment. Students can begin their repayments six months after the completion of their studies. If a student applies for subsidized Stafford loan, the interest amount is paid by the government during the deferred period. If the student has taken unsubsidized Stafford loan, he himself has to pay the interest amount during the deferred period. Another kind of federal student loan is the PLUS (parent loans for undergraduate students) loans. These loans are paid to the parents on behalf of their children. In case the parents cannot qualify for the loans, a qualifying co-signer can come in handy.

The federal government has a provision to grant bad credit student loans through the college. The federal Perkins loan is funded jointly by the college and the government. The interest rate is usually maintained at about 5%. The repayments have to be made to the college.

Bad credit student loans are granted to help students continue with their higher studies. Additionally, the students get a second chance to rebuild their credit ratings. Regular repayment assures an increased the credit rating.