Studies have shown that college enrollment is at an all-time high, which means that those seeking federal and private financial aid will face increased competition. Parents who have filed for bankruptcy, or who are considering filing for bankruptcy may also wonder – how will bankruptcy affect our ability to obtain financial aid funding for our child? Hopefully, it won’t.
There are two types of student aid funding: federal and private. Federal funds can help pay for higher education through grants and loans. Grants range in the amount given and stipulations for receipt, but the recipient is not required to pay back the amount. Federal loans are given when the recipient meets specifications as stipulated by the type of loan. Usually, the federal government provides low-interest loans and pays the interest while the student is enrolled full-time in an academic program at an approved institution. On the other hand, private loans are given based on a recipient’s or third-party’s credit history. These loans offer market-rate interest rates with various stipulations. Bankruptcy affects each type of student aid in different ways.
How bankruptcy impacts funding for college is not a cut-and-dry issue; each family’s case varies, and bankruptcy laws are complex. Generally speaking, a family’s bankruptcy status will have little to no affect on obtaining federal financial aid. Some types of aid are federally mandated to exclude bankruptcy status when considering a recipient’s eligibility, including Title IV grants and Perkins loans.
However, the effect of a parent’s bankruptcy in regards to private funding can be more complex. In most cases, a parent’s past bankruptcy will have no impact on a student’s eligibility for private funding. In this situation, it’s very beneficial to have an experienced Avondale bankruptcy lawyer handle negotiations with lenders.
Don’t let your bankruptcy impact your family’s education: be informed. For detailed information on how to navigate bankruptcy issues when applying for financial aid, consult a top Avondale, Arizona bankruptcy attorney today.