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Effects of Bankruptcy on Student Loan Eligibility

When it comes to college education, the expenses are huge. So, when you are getting a college education in Pennsylvania, it is obvious that you have to take out a loan. For the majority of students or their parents, getting a loan is common. But when you have file for bankruptcy, does it affect your student loan application? Talk to our Pittsburgh bankruptcy lawyer now.

Common Types of Student Loans

If you are wondering whether you should get a student loan even after filing bankruptcy or not, you need to know that it depends on which type of loan you are applying for. The different types of loans are as follows:

  • Perkin loans are popular for students with low income. It is a federal loan and quite popular.
  • PLUS loans come from the U. S. Department of Education and are capped at the total cost of attendance.
  • Private loans come from different banks and credit unions.
  • Stafford loans are federal loans. For undergraduate students, subsidized Stafford loans are the options and for grad students, unsubsidized loans are the right ones.

If you are applying for Perkin Loans and Stafford Loans, it is sanctioned on the basis of your financial needs and not on your credit history. Hence, your application for these two loans will be through. But this cannot be said for the other types of loans.

Adverse Credit History and Private and PLUS Loans

For plus loans, the parents of the students must not have an adverse credit history. This means if you have any history of home foreclosure, wage garnishment, or vehicle repression in the past five years, you will not be eligible for PLUS loans.

However, if five years have passed since you filed the bankruptcy, you can get the loan. Or if the endorser is not your own child, in that case, fewer years in between filing and application of loan will be approved. If you have been denied PLUS loans, your Stafford loans will increase up to $5000. Moreover, Stafford loans will have lower interest than PLUS loans.

For private loans too, you need to have a clean credit history. When you are filing for Chapter 7 bankruptcy, this will remain in your record for the next 10 years, and for Chapter 13, it will be in your record for 7 years. You need to know that the days will be counted from the day of filing, not the discharge. Talk to our Pittsburgh bankruptcy lawyer for more information.

Can Bankruptcy Eliminate College Tuition Debt?

Now, let’s discuss what will happen when the situation is reversed. If you are filing bankruptcy, will it eliminate your college tuition debt? Well, the general answer is no. College loan debt is included in the non-dischargeable debt. You will have to pay the amount.

However, if the bankruptcy court approves for undue hardship, then it might get eliminated. The court will conduct Brunner Test that will evaluate if the student belongs from the below poverty line, their current financial situation is pretty dire and they have made a case of “good faith.”

For undue hardship, it is necessary that you talk to an experienced Pittsburgh bankruptcy lawyer who will help you with the process. Come to Pittsburgh Bankruptcy Law Group and get your answers.

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