Applying for Financial Aid While in Bankruptcy

College is expensive, and funding it is a daunting task. Applying for financial aid during bankruptcy can be challenging, however, it can be done.

Federal Loans

Bankruptcy should have no impact on a student's application for federal loans. Eligibility for federal loans is based on financial need, so a student who is involved in bankruptcy will be at an advantage when applying for federal loans.

Plus Loans

"Plus loans" are loans given to a parent to help them fund their child's education. An application for a "plus loan" may be denied on the basis of poor credit history and/or bankruptcy.

Parent's Bankruptcy and Private Loans

If the parent is the party that filed for bankruptcy, the student's eligibility for private loans will be unaffected, unless they intend to use the parent as a co-signer.

Student's Bankruptcy and Private Loans

Eligibility for private loans is determined by evaluating credit risk, so if the student has recently filed for bankruptcy, he or she will probably not be eligible for private loans.

Effect on Grants

Most schools provide need-based financial aid in the form of grants. The amount awarded is determined by the financial need of the student. Since bankruptcy is evidence of strong financial need, the bankruptcy will likely increase the student's eligibility for aid.

Additional Information

Most schools will require that you provide them with a copy of your "Meeting of the Creditors" letter that you obtained from your bankruptcy trustee. This letter provides the school more information about your financial need, which helps them to determine your award.