Last year, 1.2 million people made the decision to file for bankruptcy. As many of us in Akron know, bankruptcy is often the result of debilitating debt. At a certain point, you just need relief. When a person decides to file for bankruptcy, however, it can affect other aspects of his or her life.
One of those aspects is the ability to secure loans. Just like a person who has bad credit, a person who has filed for bankruptcy will likely have to wait a few years to be accepted for a loan. While many people may think of homes or cars when talking about loans, Akron parents may be more concerned with college financing.
The truth is that filing for bankruptcy will make it very difficult for a parent to obtain any kind of credit-based loan to pay for their child's education. In many cases, however, it will not have much effect on the student.
First, those who have filed for bankruptcy probably didn't have great credit before they filed. Plus, since parents are not able to obtain a Parent Direct PLUS Loan until five years after a bankruptcy filing, it could mean their student will get up to $5,000 more from a Stafford loan, which has a lower interest rate. A student will still be eligible for federal loans like Pell Grants and Perkins loans even if his or her parent has filed for bankruptcy.
Filing for bankruptcy can be a difficult decision for some people who are worried about how it will affect the rest of their lives. Hopefully, however, we have helped put the minds of those who were concerned about financing their child's education at ease.
Source: U.S. News & World Report, "How Bankruptcy Affects College, Grad School Financing," Kelsey Sheehy, Nov. 19, 2013