Some 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:
- 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.
- 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.
- 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.
- 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.