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Can My Mom Cosign My Student Loans If She Filed for Bankruptcy?

Your lender may require a cosigner on your student loans for one of several reasons. Most commonly, they'll ask a parent, relative or beneficiary to step in and guarantee your loans because your current income as a student is insufficient to cover any theoretical repayments. If you're just graduating from high school, you may also lack the credit necessary to secure a loan on your own.

There will be no immediate ramifications if your cosigner files for bankruptcy after your loans have been issued. Your lender probably won't begin demanding repayment until after you graduate. Even then, you'll have no problems as long as you can make your monthly payments in a timely fashion. However, your mom's bankruptcy likely will render her incapable of providing financial support in the future. Once you fall behind on your payments, you'll find yourself facing off against a suddenly-aggressive lender alone.

If the bankruptcy is already part of her credit history, your lender may not permit your mom to cosign for your loan. Bankruptcies linger for years, crippling borrowers' and cosigners' credit reports for a decade or more. Depending upon the state in which you live and the time elapsed since her bankruptcy filing, your mom's financial situation may disqualify her from backing your loan for the duration of your college career.

Private lenders tend to be especially stingy with their funds. If your mom's bankruptcy filing precludes her from cosigning for a private loan that would cover the bulk of your tuition, you may have some public and non-traditional options at your disposal.

Borrowing guidelines for federal PLUS Loans tend to be less stringent than those for private loans. While there are no fixed borrowing limits for PLUS loans, these products demand that their users meet certain income and credit-history requirements. With your mom's financial woes, it's possible that your PLUS Loan application will be denied on the basis of her credit history. However, a low combined household income figure might work in your favor.

Absent PLUS Loan funding, Stafford Loans and Pell Grants can provide a valuable backstop. Awarded to undergraduate students solely on the basis of need, these products come with annual award caps of $20,500 and $5,500, respectively. Whereas Stafford Loans accrue interest at a low fixed rate and must be repaid after graduation, Pell Grants come with few strings attached and do not need to be repaid.

Disclaimer

This article contains general legal information but does not constitute professional legal advice for your particular situation. The Law Dictionary is not a law firm, and this page does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

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