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Will your bankruptcy keep your child from going to college?

On Behalf of | May 24, 2024 | Bankruptcy

You’re overwhelmed with debt and considering filing for bankruptcy. However, you have a child who is approaching college age. You likely plan to rely on government-sponsored student loans to help cover the costs – perhaps in addition to any scholarships and grants they may qualify to receive. 

However, you know that having a bankruptcy on your record will affect your ability to get credit for years. So what does this mean for college financing? Let’s take a look at two popular sources of college financing.

The FAFSA program

The Free Application for Federal Student Aid (FAFSA) program is used by millions of college students across the country. To qualify, a student just needs to provide evidence that they need financial aid to pay for college. Their parents’ credit (including bankruptcy) won’t affect their ability to get this aid.

PLUS loans

It’s a different story with these, which used to be called Parent PLUS loans. These are student loans that parents apply for. Unlike FAFSA, the parents are also the ones responsible for repaying them. That means approval is based on the parent(s)’ credit.

A parent who has filed for bankruptcy in the five years proceeding a PLUS loan application likely won’t be approved unless they have a co-signer with sufficiently good credit. Even if a parent who’s seriously in debt and has a low credit score doesn’t file for bankruptcy, they likely wouldn’t be approved on their own anyway.  

While not every option may be available to you and your child for college financing, there are plenty of options available to help cover the costs if you do some research – especially if your child excels in a particular area and gets good grades. As noted, FAFSA is also an option – although it will leave your child facing student loan debt after they graduate. 

If you’re facing serious debt, it’s a good idea to find out more about bankruptcy and how that can work with college expense obligations. Getting experienced guidance is a good first step.