Bankruptcy offers a way out for borrowers struggling to keep up with their financial obligations, but it will have a negative impact on their credit scores. Immediately following a bankruptcy filing, you may find it difficult to finance a vehicle, obtain credit cards, or get approved for a mortgage, but an adverse credit history doesn’t have to affect your educational goals. Fortunately, borrowers with bankruptcies in their credit history are protected under federal law, and will likely still be able to qualify for student loans.

How Bankruptcy Impacts Student Loan Approval

Protections for Federal Loans

Most student loans administered through the Department of Education are based on need, without consideration of the student’s credit history. Factors such as debt-to-income-ratio, lack of credit history, and adverse notations like bankruptcy will not prevent most undergraduate students from receiving financial aid. In fact, lenders issuing loans guaranteed by the Department of Education are prohibited from considering the student’s credit history when making their decisions.

Applying for Private Student Loans

Students who require additional resources or have already exhausted their available loans may decide to apply for private student loans. Unlike federal lending programs, these loans are based more on the applicant’s ability to pay rather than their financial need.

Direct PLUS Loans for Parents

Along with loans designed for students, the federal government also offers options for parents who wish to contribute to their children’s educational expenses. Although Direct PLUS loans are administered through the Department of Education, these loans do require the applicant pass a credit check, with no bankruptcies on their record in the previous 10 years.

Struggling with bills you can’t repay can negatively impact every aspect of your life, but the Pearce Law Firm has the expertise to help you find relief from debt. For over 15 years, they’ve been helping good people throughout Foley, AL, reclaim their lives and get their finances back on track. Visit their website for more on their legal services, or call (251) 301-8250 to request a consultation with a skilled bankruptcy attorney.