Will a Prior Bankruptcy Affect My Ability to Get Student Loans?

Whether a prior bankruptcy will affect your ability to get new student loans depends on the type of loan you're applying for. Your credit plays a role in eligibility for federal PLUS loans and private student loans, but it's not considered for other types of federal loans and grants.

How Bankruptcy Affects Student Loan Eligibility

For federal student loans and grants other than PLUS loans, the government won't consider your creditworthiness by running a credit check to determine your eligibility. So, if you're applying for a Federal Direct loan, the fact that you previously filed for bankruptcy will have no bearing on your eligibility for funds.

PLUS Loans: Your Credit Matters

There are two types of PLUS loans, those taken out by parents who are borrowing money for their children's education and those taken out by graduate and professional students. (A Direct PLUS Loan made to a graduate or professional student is commonly referred to as a "grad PLUS loan.")

To receive a parent PLUS or grad PLUS loan, you must

• be the biological or adoptive parent (or in some cases, the stepparent) of a dependent undergraduate student enrolled at least half-time at an eligible school or be a graduate or professional student enrolled at least half-time at an eligible school in a program leading to a graduate or professional degree or certificate, and
• meet the general eligibility requirements for federal student aid (including having a financial need).

And, unlike other Federal Direct loans, you must also pass a credit check to get a PLUS loan.

You Can't Have an Adverse Credit History for PLUS Loans

In most cases, you can't get a PLUS loan if you have an adverse credit history. (34 C.F.R. § 682.201(b),(c), 34 C.F.R. § 685.200 (2024).) An "adverse credit history" consists of:

• Having accounts with a total outstanding balance greater than $2,085 that are 90 or more days delinquent as of the credit report date, or that have been placed in collection or charged off during the two years before the credit report date.
• Having a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a federal student loan debt, during the five years preceding the date of the credit report. (34 C.F.R. § 682.201, 34 C.F.R. § 685.200 (2024).)

Overcoming an Adverse Credit Event

You might be able to overcome one of the above adverse credit events, including the existence of a bankruptcy discharge within five years, if you:

• Get an endorser and complete PLUS Credit Counseling. An endorser is like a cosigner. It is someone who agrees to repay the loan if you don't and doesn't have an adverse credit history.
• Show extenuating circumstances and complete PLUS Credit Counseling. You'll have to document to the U.S. Department of Education's satisfaction that the information causing the adverse credit decision is incorrect or you have extenuating circumstances relating to the adverse credit history. You need to show that the adverse credit decision was made in error, is missing important information, or is based on data that is now out of date. For example, maybe the bad credit was a result of accounts that didn't belong to you, or you were the victim of identity theft.

With either option, you'll have to complete PLUS Credit Counseling.

Can I Get Private Student Loans After Bankruptcy?

Not all new student loans are issued by the federal government. Banks and other financial institutions also lend money to students. In fact, the number of private student loans (sometimes called "private label loans") is increasing as the cost of higher education increases (because often federal loans and grants aren't enough to cover the expense of going to college).

Private student loan lenders act like other creditors, which means your credit history is very important to them. If you filed for bankruptcy within the past seven or ten years (bankruptcies drop off your credit reports after seven or ten years, depending on the type of bankruptcy), that will negatively affect your credit scores. The lower your scores, the less likely you'll qualify for a private student loan. If you're able to get a loan, it will likely come with a high interest rate and fees.

However, if your bankruptcy is fairly old, and you've done a lot to rebuild your credit in the meantime, it might have little effect on your ability to get private student loans.

Check Your Credit Reports

Before you apply for a student loan that's based, at least in part, on your creditworthiness, get copies of your credit reports from each major reporting agency (Equifax, Experian, and TransUnion) from the Annual Credit Report Service at www.annualcreditreport.com. Then, review your reports to make sure they're accurate. Having errors in your credit reports can hurt your credit scores, so you want to correct any issues as soon as possible.

Getting More Information About Student Loans and Bankruptcy

To learn more about student loan debt and bankruptcy, read:

• Student Loans in Chapter 13 Bankruptcy
• How to Get Out of Default on Your Federal Student Loans, and
• Discharging Cosigned Student Loans in Bankruptcy.

Talk to a Lawyer About Student Loans and Bankruptcy

If you have questions about how filing for bankruptcy might affect your eligibility for student loans in the future (or whether you can discharge your existing student loans by filing for bankruptcy), consider talking to a bankruptcy attorney.

If you need information about how student loans work and your eligibility for such loans, you could also consider talking to a student loan attorney or debt settlement attorney who deals with student loans.