Can you still go to College after Bankruptcy?

by Wendy Black Polisi on December 15, 2009

: Image via Wikipedia

Generally speaking, there is no bar to a person that has filed for bankruptcy from enrolling in college; however, financing college can become more difficult. Student loans generally come in two forms, private and government. Student loans administered by private lenders can probably be ruled out for quite a few years after bankruptcy discharge. The student’s credit standing is the key determining factor for private lenders. Government loans (and grants), on the other hand, are based on need as opposed to credit worthiness and bankruptcy cannot be used as a reason to deny these loans.

Financial aid administrators of federal student aid programs can not deny a loan based solely on a bankruptcy and are prevented from citing a bankruptcy filing as being indicative of an unwillingness to pay back the loan. That being said, they can look at the student’s post-bankruptcy credit performance as an indicator of the student’s willingness to repay the loan. This rule primarily applies to Title IV student grants and loans, while other forms of federal assistance have different qualifications.

For example, loans from the PLUS program and especially for graduate students seeking a Grad PLUS loan, do take credit history – including bankruptcy – into consideration. This restriction is shorter than that on private loans, and only holds true for five years after bankruptcy discharge as opposed to ten years. Sometimes this can also be overcome if the student has a qualified co-signer with excellent credit that is willing to sign on. Further, even if the PLUS is denied, this triggers an opportunity to obtain an increased Stafford loan. One thing you can try to do is reestablish your credit as soon as possible after your bankruptcy. After bankruptcy credit repair is critical to your ability to get loans. A good way to get started is to get an after bankruptcy credit card.

The primary exception to all of the above is if the student is currently delinquent or in default on student loans already in repayment. This is a deal breaker that eliminates almost any chance of getting federal subsidies for school, loans or grants. Therefore it is very important to ensure that your after bankruptcy credit is in good shape and that there are no negative items being reported with respect to student loans since the time of the bankruptcy.

Remember that student loans may not be discharged through a bankruptcy, so if the student wants any chance of getting federal financial aid after the bankruptcy, it is probably better to pay off all outstanding loans before filing. Any negative incidents reported after the bankruptcy case is closed will likely be enough to make getting federal assistance extremely difficult to obtain. The good news is that it is possible to get after bankruptcy credit – You just need to get serious about after bankruptcy credit repair.

Student Loans : How to Get Student Loans for People With Bad Credit