Post-Bankruptcy Survival: Borrowing Student LoansSome debtors exiting bankruptcy may decide to return to school and earn a degree.  To finance that education, especially if they are a non-traditional student, or if they are trying to earn a post-graduate degree, student loans are usually a requirement.  But what are some of the things post-bankruptcy debtors should consider before they take out a student loan?

Let’s take a look at just a few:

  1. The rules have changed. The government has passed a law that has removed private banks from the business of lending federal student loans to students as of July 1, 2011. That means that if you want to get a federal loan after bankruptcy, you need to borrow directly from the government.
  2. Debtors exiting bankruptcy should not choose a student loan simply by interest rate offerings. A private student loan (one not issued by the government) may offer a lower interest rate; but that rate is usually variable, which means it can increase. On the other hand, government student loans offer fixed interest rates for the life of the loan.
  3. When it comes to repaying student loan debt , government loans offer more flexibility while private loans are less forgiving.  It will take 9 months of missed payments for your government student loan to be declared in default while only one or two missed payments can land you in default on a private student loan.
  4. If you are considering taking out a private student loan right after bankruptcy, you may need a co-signor. If you are unable to repay your student loans, the co-signor will be held responsible for payment.