Does bankruptcy impact college admissions or financial aid?

The following is not intended as legal advice. For legal advice, including advice related to bankruptcy, please consult with a licensed attorney. 

I am thinking of filing for bankruptcy (Chapter 13). Will I still be able to apply for school (Bachelor’s and Master’s degrees) and financial aid? —Poshe

Hi Poshe,

If you decide to file for bankruptcy, the impact of that decision will primarily be felt in your credit report and credit score. Remember, your credit report is a record of your experiences using borrowed money, so if you’re unable to repay your debts as agreed upon that will make it less likely for future lenders to extend you credit.

Fortunately, while filing for bankruptcy can have a significant financial impact on your life (most directly on your ability to acquire loans and credit), it’s very unlikely that it will prevent you from getting a college education. Although every college and university has its own admissions process, that process rarely involves a credit check. Generally speaking, your credit history doesn’t necessarily have much bearing on your worthiness as a student.

Things are a little murkier when it comes to student financing. Most federally funded student loans, including Stafford and Perkins loans, do not require a credit check. If you are able to get adequate student funding through these federal programs, then your potential bankruptcy shouldn’t be a problem.

However, if you decide to apply for privately funded student loans, you may have an issue. Your credit history and credit score will have an impact on your ability to get a private loan. And although the negative impact of a bankruptcy decreases over time, a Chapter 13 bankruptcy filing will stay on your credit report (influencing your score) for 7 years. (Chapter 7 stays on your report for 10 years.)

This doesn’t mean you won’t be able to get a private loan, it just means that it will be difficult. You may need to bring in a co-signer with a strong credit history. You may also find that the terms being offered are far from ideal.

So, to sum up – filing for bankruptcy is unlikely to hinder your ability to get into college, but it may make it difficult to obtain a private student loan. Thankfully, you’ll still be able to complete your FAFSA (Free Application for Federal Student Aid) and receive federally-backed student aid. Good luck!

Jesse Campbell is the Content Manager at MMI, focused on creating and delivering valuable educational materials that help families through everyday and extraordinary financial challenges.

  • The Consumer Federation of America (CFA) is an association of nonprofit consumer organizations that was established in 1968 to advance the consumer interest through research, advocacy, and education. Today, nearly 300 of these groups participate in the federation and govern it through their representatives on the organization's Board of Directors.

  • Since 2007, the Homeownership Preservation Foundation (HPF) has served as a trusted, neutral source of information for more than eight million homeowners. They are partnered with, and endorsed by, numerous major government agencies, including the U.S. Department of Housing and Urban Development and the Department of the Treasury.

  • The mission of the U.S. Department of Housing and Urban Development (HUD) is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD works to strengthen the housing market in order to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; and build inclusive and sustainable communities free from discrimination.

  • The Council on Accreditation (COA) is an international, independent, nonprofit, human service accrediting organization. Their mission is to partner with human service organizations worldwide to improve service delivery outcomes by developing, applying, and promoting accreditation standards.

  • The National Foundation for Credit Counseling® (NFCC®), founded in 1951, is the nation’s largest and longest-serving nonprofit financial counseling organization. The NFCC’s mission is to promote the national agenda for financially responsible behavior, and build capacity for its members to deliver the highest-quality financial education and counseling services.