Lots of graduate and undergraduate students face credit problem and it is not at all easy to come out of such a terrible financial situation in the early 20s. You might not know that you can get a student loan even after becoming bankrupt.
Taking a student loan after bankruptcy is a major step towards acquiring financial freedom. Federal loans are helpful to borrowers, as they don’t ask for any repayment until 6 months after completion of the course. If your parents are turned down for a loan because of bad credit, you can still ask for an increased student loan through Stafford loan. In case some extraordinary circumstances are the reasons of the bankruptcy, there are chances that your lender would try to find out other ways to sanction a loan.
The amendments made in the Bankruptcy Code in the year 2005 made most of the student loans non-dischargeable. It means if you have taken a student loan of $2,500.00 to $250,000.00, you will be bound to take some financial decision about your employment in future and your lifestyle. You are told about the interest and penalties that occur if your name appears in the defaulters list.
But how would it be possible to get access to such a loan after discharging student loan bankruptcy?
There are two types of loans: government and private. We know that the main aim of the government is to make the life of all individuals better regardless of what their background is. It is the responsibility of the government to make sure that you have access to basic amenities that includes education also. Getting a government loan is easier because these loans are not provided on the basis of your credit history.
If you are applying for a private loan, the lender will see your credit report before offering any loan. Plus the private loan providers also have a higher interest rate on all the installments. This is going to create problems for you when you will start repaying the loan, as you cannot consolidate both: private and government loans after completing your education. The result will be two loan payments and things will get complicated.
In no way can bankruptcy stop you from getting financial aid for your education. If you are in search of an opportunity to attend college again after declaring yourself bankrupt, you can find some financial aids and student loans to get you out of debts after bankruptcy.
The first step is to fill out FAFSA (Free Application for Federal Student Aid) form, which will allow your school and government, in finding out the type of financial help you are eligible for.
If you don’t have any drug or crime record, your chances of getting financial aid or loan are brighter, regardless of your bad credit history or bankruptcy declaration. Some schools also provide financial aid to students in the form of a merit scholarship or grant and you don’t have to repay any of these aids. You will get a need based grant on the basis of your household income and scholarship depending upon your academic performance, extra curricular activities & other specialties.
Drawback
One major drawback of taking a government loan is that you can get only a fixed amount. If you take a loan that is not sufficient, you are free to consider private loan options also. Nobody, other than you can decide, if you can really handle two loan payments at the same time.
Coming to private loans, they have certain limitations. The main problem you can face in the entire process is that government loans have a fixed interest rate, whereas the rates in private loan are adjustable. It means your loan payment amount will increase even if your salary remains the same.
But do remember that declaring bankruptcy does not mean that you are free from repaying the loan. If you are bankrupt, you can apply for and get a loan but you cannot avoid paying back these loans by making use of the bankruptcy situation.
How to repay the loan after bankruptcy?
There are some steps that might help you in getting refinance after bankruptcy:
- Make a budget of your daily expenses and follow it. Try to set the expenses as low as you can and focus on your basic needs.
- If you have freed up some money with bankruptcy, apply it to your loan.
- If you qualify for it, try to get a bankruptcy debt consolidation loan . It will have lower interest and monthly payments.
- You can also look out for a part time job to pay off the loan.
- You should also claim your student loan interest rates in your tax return. This will help you in saving money when you will start working.