You will not be eligible for the Federal Parent PLUS loan for five
years from the date of your bankruptcy discharge. The clock starts at
the beginning of your Chapter 13 repayment plan, not the end. So
depending on how long you've been in the Chapter 13 repayment plan,
you might be eligible for the Parent PLUS loan.
Your daughter's eligibility for the Federal Perkins and Federal
Stafford loans is not affected by your bankruptcy filing. There is no
defense of infancy for federal education loans, so her age also does not
If you are ineligible for the Parent PLUS loan, she will be
eligible for increased unsubsidized Stafford loan limits. The
unsubsidized Stafford loan limits for a dependent student whose
parent was denied a Parent PLUS loan are the same limits available
to independent students. These limits are $4,000/year higher during
the freshman and sophomore years and $5,000/year higher during the
junior and senior years. The maximum total Stafford loan debt for an
independent student for four years of college is $45,000.
Private student loans, however, are another matter. She is unlikely to
qualify for private student loans without a cosigner. Most lenders
will not allow a parent who filed for bankruptcy within the last 7 or
10 years to cosign a private student loan. Before the credit crisis
some lenders would make exceptions when the bankruptcy was due to
circumstances beyond the family's control, especially when those
circumstances are unlikely to happen again. But the credit crisis has
lead to much tighter credit underwriting standards. Even borrowers
with clean credit are having difficulty getting private student loans.
But if your daughter exhausts the federal loan limits and still needs
money, that's probably a sign that she's overborrowing. Students
should not borrow more for their education than their expected
starting salary and ideally a lot less. If she's going to need to
borrow more than $10,000 per year in school, she should consider
enrolling in a less expensive college, such as an in-state public college.
I'm a parent in default on a FGSL. This happen in the 1980s when I
had to leave the States because I couldn't find a job and was
experiencing severe financial hardships. Now my son is going to
college and will need federal aid. Because of my loan default can he
be denied financial aid? Can my actions end up hurting him?
The GSL is a predecessor of the Stafford loan. Your default on this
federal education loan does not
affect your son's eligibility for
federal student aid.
Your default does, however, affect your ability to borrow the Federal
Parent PLUS loan program to pay for his education. Parents who are in default
on a federal education loan are ineligible for the Parent PLUS loan
their defaulted loans. To regain eligibility for federal education
loan you will have to make six full voluntary consecutive on-time
monthly payments on the loans, not counting any payments made through
wage garnishment or the offset of income tax refunds. In the meantime
your son will be eligible for the higher unsubsidized Stafford loan
limits available to independent students.