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Bankruptcy and Parent plus loan

Louie17Louie17 Registered User Posts: 41 Junior Member
I checked multiple websites but it doesn't clearly say about parents being bankrupt. If my parents are bankrupt and I'm a dependent student, how would that afffect my parents getting a plus loan ? And if I'm affected what are my options for other sources of loans

Replies to: Bankruptcy and Parent plus loan

  • twoinanddonetwoinanddone Registered User Posts: 13,638 Senior Member
    If your parent has filed bankruptcy in the last 5 years, it is unlikely they will qualify for a plus loan. If the parent is denied, the student will be able to take another $4000 (freshman and sophomore years) in unsubsidized loans.
  • kelsmomkelsmom Super Moderator Posts: 14,442 Super Moderator
    Sometimes the parent will pass a credit check despite the bankruptcy. In that case, the school's policies kick in. Where I used to work, if the parent provided proof that they were in active bankruptcy & the terms would not allow them to take on additional debt, we allowed the student to borrow additional unsubsidized loans (at the independent student level for the year in school).
  • AroundHereAroundHere Registered User Posts: 2,241 Senior Member
    Parent PLUS has a very basic credit check. It's not anything like 5 years. Maybe 3 to 6 months?

    At any rate, it's very easy for parents to get in over their heads with this loan. For a parent who's already been through bankruptcy, just because the government will give the loan does not mean it's a good idea to take the money.

    Student loans, including PLUS, are not generally dischargeable in bankruptcy. The federal government can go after your parents for life, including withholding funds from tax refunds, social security, etc.
  • austinmshauriaustinmshauri Registered User Posts: 5,753 Senior Member
    Last August you said you were short over $12k/year for this college. The in state rate for TX residents is $18k, so your only award was the ~$5k Pell grant? Are there any community colleges that you can transfer to for your 2nd year? You could take the $6500 federal student loan and bank it for your junior year at a 4-year school.
  • twoinanddonetwoinanddone Registered User Posts: 13,638 Senior Member
    A Federal PLUS loan borrower must not have an adverse credit history, which is defined in the regulations as involving a current delinquency of 90 or more days on any debt or a five-year lookback for certain derogatory events, such as bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment or a default determination.

    Even if a parent has been denied a Federal PLUS loan because of an adverse credit history, it may still be possible to get a Federal PLUS loan. If the denial was due solely to a 90-day delinquency, the parent can make payments to bring the delinquent account current and then reapply for the Federal PLUS loan. The parent can appeal the Federal PLUS loan denial based on extenuating circumstances.
  • thumper1thumper1 Registered User Posts: 63,122 Senior Member
    I'll put this thought out.

    If your parents have a recent bankruptcy...why would it be advisable for them to incur another round of debt?
  • twoinanddonetwoinanddone Registered User Posts: 13,638 Senior Member
    It really depends on the reason for the bankruptcy, and often those who have recently declared bankruptcy and had all their debts erased are the best credit risks for lenders. They can't file bankruptcy again for at least 7 years.

    But yes, look at ways to finance college that don't involved large debt - go to a cheaper school, work more hours, find a living situation that is low cost or free. The common one is being an RA, but I know someone who was an apartment complex rental agent and got a free apartment, someone who was the art director at a senior center and got a free room, maintenance man at a sorority house, live in nanny for a woman whose kids went to day care but needed someone for overnights.
  • mom2collegekidsmom2collegekids Registered User Posts: 82,437 Senior Member
    ^^^

    that may be true, but really, this is a family that qualifies for near-full-Pell. Taking on any debt would be a terrible burden for them, even if not dischargeable. Either way, Plus isn't dischargeable anyway.

    >>>
    I'll put this thought out.

    If your parents have a recent bankruptcy...why would it be advisable for them to incur another round of debt?
    >>>

    Exactly.


    I don't intend to sound "mean" but we've seen many low/modest income parents feeling desperate to provide a college education for their kids so they take on ridiculous debt. It's rarely necessary. Is there a college you can commute to? Also, look at getting a job where the employer helps pay for college. Many large companies help pay for college.
  • apraxiamomapraxiamom Registered User Posts: 249 Junior Member
    Or the parent can make monthly payments to the school directly, without a loan.
  • austinmshauriaustinmshauri Registered User Posts: 5,753 Senior Member
    I think the gap is ~$12k/year. Full Pell families can't afford $1,000+/month payments.
  • mom2collegekidsmom2collegekids Registered User Posts: 82,437 Senior Member
    ^^^
    Exactly. Typically full or near full Pell families don't even have an extra $200 each month to put towards college
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