If You Can't Afford Your Old Student Loans, Why Would You Borrow More?

Student Loans, College and Bankruptcy
Student Loans, College and Bankruptcy

On the Today Show's Money 911 segment Wednesday, a caller explained that she had filed for bankruptcy -- but was unable to escape from her student loans because students loans are generally not dischargeable in bankruptcy.

She then asked how her bankruptcy would affect her eligibility to get more student loans in the future.

The short answer is that bankruptcy doesn't generally affect eligibility for federal student loans, with the exception of programs like the PLUS loan program. As Mark Kantrowitz explains on FinAid.org, "As long as there are no delinquencies or defaults on student loans currently in repayment, the student should be eligible for additional federal student loans, regardless of any past bankruptcies. However, if some of the student's federal student loans are in default and were not included in a bankruptcy, the student will not be able to get further federal student aid until he resolves the problem."

So the technical answer to her question is that in order to take out more student loans, she needs to get current on any loans she has now, and realize that her trashed credit will likely make her ineligible for a PLUS loan or most non-federal student loan programs.

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But that answer, which technically accurate, is sort of like giving a heroin addict tips on where to inject once he's run out of unscarred skin on his arms.

Here's the non-technical answer: If you filed for bankruptcy and are behind on your student loans, it should be pretty clear that borrowing money to pay for stuff hasn't worked out well for you in the past. Bankruptcy is a horrible thing to experience, but if you must go through it, you might as well use it as an opportunity to learn how to better manage your money. Otherwise, you could end up like Toni Braxton, who filed for her second bankruptcy earlier this month.

Excessive borrowing led the caller into a financial ditch, and it's highly unlikely that excessive borrowing will be the right path out.

My advice? If you want to continue your education -- and that's a noble thing to do -- find a way to do it without borrowing money. Working full-time while taking classes at night is one way to do that. Sure, it takes longer and it's a lot of work. But when you graduate, that diploma will be yours free and clear.

Zac Bissonnette'sDebt-Free U: How I Paid For An Outstanding College Education Without Loans, Scholarships, Or Mooching Off My Parentswas called "best and most troubling book ever about the college admissions process" by The Washington Post.