If you’re considering bankruptcy to get out from under crushing debt at the same time you have a child who plans to go to college within a few years, you’re likely doubly anxious about your financial situation. While bankruptcy can be the best solution, it’s crucial to be aware of the consequences – at least short-term ones – on your ability to get credit.
So what does bankruptcy mean for financing options for your child’s college education? There may be multiple scholarship and grant opportunities that are worth looking into when the time comes. But what about student loans?
The FAFSA program
The Free Application for Federal Student Aid (FAFSA) program helps millions of young people and their parents be able to afford a college education. Fortunately, a parent’s bankruptcy (and their credit in general) have no bearing on whether they can get financial assistance through FAFSA. A student only needs to show that they have a legitimate need for financial assistance.
PLUS loans
You may have heard of these loans. They used to be called Parent PLUS loans because parents are the ones who apply for these student loans, and they’re responsible for repaying them. This can help save a young person from graduating with significant debt weighing them down.
A bankruptcy filing within the last five years would likely make you ineligible to qualify for a PLUS loan unless you have a qualified co-signer. Of course, if you didn’t file for bankruptcy, a poor credit score would also affect your ability to get one of these loans.
Your bankruptcy doesn’t have to derail your child’s (and your) plans for a college education. However, it’s important to know what options for paying are – and aren’t – realistic. There are plenty of options for aid, and good planning can improve your child’s chances of being able to take advantage of one or more of them. In the meantime, it’s wise to learn as much as possible about bankruptcy and other ways to take control of your financial health.