Kansas Bankruptcy Filers Continue Their Educations
We are often asked whether filing for bankruptcy will affect a student’s college or graduate financial aid opportunities. Bankruptcy filers will qualify for some student loans and may struggle to be approved for other loans.
Federal loans consisting of Stafford and Perkins loans are awarded based on need and not credit worthiness. Filing a chapter 7 or 13 bankruptcy will not affect your eligibility for these federal loans. You will need to maintain good credit after your bankruptcy case. You will not want to run up new credit card debts without being able to pay the balances in full. You will not want to default on any new or reaffirmed car loans. You will also especially not want to default on your current student loans.
If you find yourself struggling with your student loan payments before or after bankruptcy you need to address the problem before it gets worse and wrecks havoc on your chances of qualifying for additional federal student loans. Federal loans offer several different repayment programs, some even taking into account your current income level. You may qualify for deferments or forbearance. If you are currently in school, your federal student loans should not be an issue as they probably in a grace period. Defaulting on your student loans can lead to denial of future federal loans.
PLUS loan eligibility could be affect by a bankruptcy filing. Your chances of approval may be better if you completed a chapter 13 repayment plan, rather than a chapter 7. This is also true of private student loans which are obtained from private lenders. Private student loans are based on credit scores and the likelihood of a student being able to repay the loan. A bankruptcy filing can affect your ability to qualify for private loans. If you have a credit worthy co-signor a private lender may be more willing to approve your student loan. If you are attending school or plan on attending school after filing for bankruptcy, you should consult with lenders and your school’s financial aid department to discuss your options if you are relying on private loans.
Private student loans should be taken out only when absolutely necessary and for the minimal amount. Unlike federal student loans, private lenders offer inflexible repayment options and higher interest rates. You should explore every other possible option before considering private student loans. Taking the time to review and apply for grants and scholarships is well worth the effort to avoid private student loans.
Student loans are necessary for the majority of student s to attend college. Students and parents must address student loans like another kind of debt: choose wisely and as little as possible.
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