Education is often a very valuable investment. Making the decision to attend school either as an undergraduate or graduate student takes a lot of careful thought and planning, however. One of the biggest components of deciding to go to school is financing. There are a lot of forms of student aid available, but loans are often an inevitable part of the equation. In order to receive a loan, it's typically necessary to meet credit requirements.
There are a lot of factors that go into determining a person's credit score, but financial history is obviously critical. Those who have filed Chapter 7 bankruptcy -- or are thinking about it -- are probably wondering what it means for their financial future and ability to borrow.
For parents looking to help finance a child's undergraduate education, the question of bankruptcy can be a difficult one. Of course, there is a strong desire to help a child out, but financial constraints might be unavoidable. One financial observer notes that certain government-sponsored and private loans might be difficult to receive after filing bankruptcy for a number of years. Parents in this situation could benefit from understanding how bankruptcy could affect education financing.
At the same time, when parents file for bankruptcy, it isn't likely to directly affect their child's ability to obtain a loan. In fact, a report from U.S. News suggests that parents seeking bankruptcy could increase eligibility for Stafford loan awards, for example.
For adults pursuing grad school, obtaining financing might be a bit more complicated. In the short term, lenders might not be willing to offer a loan, but Chapter 7 bankruptcy can provide the debt relief people need. Through this process, consumers are given the opportunity to discharge debt, which can set the stage for rebuilding credit.
The important thing to remember is that bankruptcy is not something that will permanently prevent people from being able to borrow. Still, it might be helpful to set expectations appropriately when dealing with debt and financing an education in order to create a workable plan that works for everyone involved.
Source: U.S. News, "How Bankruptcy Affects College, Grad School Financing," Kelsey Sheehy, Nov. 14, 2013