The cost of a college education becomes more expensive each year. Many students would not be eligible to attend a college or university if it wasn’t for student aid programs. The majority of college graduates have thousands of dollars in student loan debt upon graduation and many are struggling to repay these loans. Few students will be fortunate enough to qualify for a grant. In a grant assistance program, students do not have to repay the money unless the fail to meet the criteria of the grant assistance program. Defaulting on payments for either a student loan or a grant, can result in serious consequences.
Student loan debt is the fastest growing source of debt for young adults. Many graduates are facing a stingy job market and finding it difficult to keep up with their loan payments. The problem with defaulting on a student loan is that you have few options for assistance when finances get tight. Federal student loans offer two programs, Income-Based Repayment plan and the Public Service Loan Forgiveness program, which are designed to help graduates with their loan payments in the event of financially tough times. Student loans obtained through a private financial lender do not offer these same programs, but may allow for deferred payments if you can prove financial hardship. Neither type of student loan is allowed to be discharged in bankruptcy. Graduates that find themselves seeking bankruptcy protection will not be able to have their student loans discharged in Chapter 7 bankruptcy.
Grant Assistance Programs
Some students qualify to receive a grant to pay for their college expenses. Grant assistance programs provide money that is not required to be repaid, but require the student fulfill the grant program requirements. Typically, these requirements are based on the enrollment of the student and their attendance. For example, a grant assistance program may require the student to be enrolled as a full time (12 or more credit hours), obtain a grade of C or higher, and complete at least 60 percent of their courses. If a student was to fail the course, or drop the course before the 60 percent completion mark, they would be required to repay a portion of their grant money. Failing to repay the specified amount requested by the grant assistance program can lead to the grant provider pursuing collection efforts. It is also likely that a student who defaulted on grant repayment will not be eligible to receive a grant in the future. For those that may be experiencing a financial hardship, the grant program may be willing to negotiate a repayment plan. Like a student loan, grant debts are not eligible for discharge through bankruptcy.