I recently got a bankruptcy discharge on my credit card debt. I have one year left to graduate with a PhD. I reached my limits of borrowing federal subsidized and unsubsidized loans. I am wondering whether filing a bankruptcy will affect my ability to get student loans for my last year.
The effect your bankruptcy will have on your ability to obtain student loans will largely depend on the type of loans you wish to use to finance your remaining education. Because your bankruptcy filing will likely have significantly lowered your credit score, certain types of loans may be more difficult to obtain.
Most federally insured loan programs, such as Stafford and Perkins loans, do not take students’ credit rating into consideration when qualifying applicants; therefore, your bankruptcy filing should not affect your ability to obtain these types of federally guaranteed loans. On the other hand, the PLUS loan program, which is available to parents of undergraduates and to individual graduate students, does take the applicant’s credit rating into consideration in making lending decisions; if you need to obtain this type of loan, the lender may require that you have a cosigner with a better credit score. To learn more about the various loan options available to assist graduate students, you can visit salliemae.com.
You mention in your question that you have “reached your limits of borrowing” for subsidized and unsubsidized loans. I assume that you are referring to the Stafford Loan program, which allows graduate students to borrow a maximum of $138,500, of which $65,500 can be subsidized (subsidized loans are those in which the federal government pays the student’s interest payments while loan repayment is deferred). If you have reached the aggregate limit for Stafford loans, you may wish to consider PLUS loans, which I mentioned previously. Your bankruptcy filing will likely make obtaining a PLUS loan more difficult, but if you have a willing cosigner whose credit score is high enough to qualify for the a loan, you should be able to use the PLUS loan program to help finance your final year of graduate school. To read more about the Graduate PLUS Loan program, you can visit salliemae.com.
Another option which you may wish to explore is the private student loan market. Private student loans are issued by lenders without any government guarantee of repayment in case of default; for this reason, the interest rates tend to be higher and the loan deferment and repayment options are usually less generous. Because lending decisions on private student loans are largely based on the applicant’s past credit history, your bankruptcy filing could be a significant hurdle to obtaining any private loans. You may be able to find a lender willing to lend you the money you need, but the lender may ask that you have a more credit-worthy cosigner accept liability in case you default on your payments. Lender may also demand a significantly higher interest rate on your loans due to your credit problems. To learn more about private loans available to students and their families, I encourage you to visit finaid.org; there, you will also find a list of providers of private student loans which may help you start your search.
For additional information about student loans, you can visit the Bills.com Student Loans Page. I wish you the best of luck in finding a means to finance your final year of doctoral program, and hope that the information I have provided helps you Find. Learn. Save.