Student Loans after Bankruptcy

If you filed for bankruptcy but still want to go to college and need student loans to go, don’t feel financing your education is impossible. While private loans are virtually an impossibility, students that filed for bankruptcy are still eligible for Federal student loans. The Federal Government awards student loans based on need rather than credit rating, and the Feds finance more college educations than any other loan provider.

In general, you’re typically better off financing a college education through the U.S. Government Federal loan programs than going through a private lender anyway. The Direct Loan program typically offers reasonable, honest terms, a reasonable grace period following your graduation (about six months) before you need to repay them, and even gives you the option for alternative payment plans if you cannot comfortably afford the standard payments.

Other than interest, you are assessed no further charges other than payments due on your principal balance. You can easily apply for a forbearance, and if you go back to college for any reason, it’s typically automatic. And best of all, you can consolidate your loans or take on a graduated, income-based or extended repayment plan to reduce your payments with little hassle.

With a private lender, your payments are generally fixed, other charges often apply and to make any changes requires quite a bit of hassle, if they’ll allow you to change your payment plan at all. And with a private lender, good luck getting a forbearance if needed: Pay them on time or suffer the consequences.

One caveat is that the government typically gives you a general amount based on their perceptions of your need relative to the cost of tuition, and it’s not always enough. At a state school with low tuition, the loan amount is typically more than enough to cover tuition and books, sometimes even part or all of your living expenses. If you’re living with your parents while attending or working to pay expenses, you may even be able to pay part of it back at once, reducing your financial burden once you begin repayment.

But if you’re going to school out of state or tuition costs are very high, the loans may not be enough. In this case, you can still attend a prestigious school out of state, but you’ll probably need to take a lighter load of classes to make it work financially.

That said, all hope is not lost for financing a college education if you file for bankruptcy. The Federal Government awards student loans based on need, and can finance your college education within reason.