Will filing for Bankruptcy affect my eligibility for student loans and financial aid?

Generally, a bankruptcy will not have an impact on a student’s eligibility for federal student aid. Under 11 USC 525(c), there is an anti-discrimination rule that says that grant or loan aid may not be denied to a student who has previously filed bankruptcy. However, if some of the student’s loans are in default and weren’t included in that bankruptcy, the student will not be able to get additional federal student aid without resolving this problem.

However, Parent Loans for Undergraduate Students can be denied if the parents have a negative credit history. A negative credit history would include having debts that were discharged in bankruptcy within the last five years. If this is the case, the parents may still be eligible for this loan if they are able to secure an endorser who does not have a negative credit history.

Private loans are different from federal student aid because there is no anti-discriminatory law in place that requires private companies to loan money to students. Most bankruptcies will in fact have an impact on a students eligibility for a private loan. However, if a parent went through bankruptcy, it will not have an impact on their child’s eligibility for private loans unless the parent will be required to cosign. The student should first contact the financial aid to discuss the impact the bankruptcy will have on obtaining a private loans. If there are still problems, the student should then consult with their bankruptcy attorney.