Are you frustrated because your Parent PLUS Loan was denied? A Parent PLUS Loan denial can be frustrating, but you still have options to secure funding for your child’s education. Here’s what you can do next.
Eligibility Criteria for a Parent PLUS Loan
First, it’s good to know the qualification criteria to understand potential reasons why your loan request was denied.
To be eligible for a Parent PLUS loan, parent borrowers need to meet the following eligibility requirements:
- You must be the biological or adoptive parent of the student.
- Stepparents can borrow a Parent PLUS Loan while married to the student’s custodial parent.
- Your student must be a dependent undergraduate student enrolled at least half-time in a college eligible for Title IV federal student aid and participate in the Direct Loan program. (Some community colleges have intentionally opted out of the Direct Loan program to preserve eligibility for the Federal Pell Grant. If a college has a cohort default rate that is too high, it can lose eligibility for all federal financial aid, not just student loans.)
- You cannot have an adverse credit history, though some exceptions exist for extenuating circumstances.
- You and your child must be U.S. citizens or eligible non-citizens, not be in default on federal loans, and must meet other general eligibility requirements.
If you fail to meet any of these criteria, you might find that your loan application is denied. If that’s the case, there are some options you should consider.
1. Obtain an endorser
If you’ve been denied a Parent PLUS loan because of an adverse credit history, you can qualify for the loan if you obtain an endorser.
An endorser is like a co-signer. The endorser agrees to repay the PLUS loan if the parent defaults or cannot repay the debt.
The endorser must not have an adverse credit history and must not be the student on whose behalf the PLUS loan is borrowed.
If you obtain an endorser for your PLUS loan, you must complete PLUS Loan Credit Counseling.
2. Identify extenuating circumstances
Another option to qualify for a Parent PLUS Loan, despite an adverse credit history, is to explain any extenuating circumstances related to the adverse credit. Extenuating circumstances may still allow you to qualify for a Parent PLUS loan. This includes situations such as:
- A satisfactory repayment agreement between you and a creditor with at least six months of on-time payments
- A divorce decree showing that you aren’t responsible for the debt
- Proof that the debt in question was included in a bankruptcy filing
The U.S. Department of Education has published a more comprehensive list of extenuating circumstances.
If the U.S. Department of Education is satisfied that your extenuating circumstances qualify you for the loan, you must complete PLUS Loan Credit Counseling.
3. Document incorrect information
Review the adverse credit decision for any mistakes. If the information resulting in adverse credit is incorrect, you must document this for the U.S. Department of Education and appeal the loan denial.
4. Bring delinquent accounts current
If you’ve been denied a Parent PLUS Loan because of an adverse action from a delinquent account, you can fix this by making payments to bring that account current. Once you do that, you can either re-apply for the Parent PLUS Loan or explain it as an extenuating circumstance.
If you re-apply for the Parent PLUS Loan, you may need to wait until the status change of the delinquent account is reflected in your credit report.
5. Have another parent apply
Is there another parent who can apply for the loan? Remember, biological or adoptive parents are eligible for a Parent PLUS loan. Stepparents may be able to apply in some cases, which is an option to consider.
If the other parent doesn’t have an adverse credit history, they may qualify for a Parent PLUS Loan.
6. Consider private lenders
You may want to consider private student loans and private parent loans. The credit criteria for private loans differ from the U.S. Department of Education. Some lenders, such as credit unions and community banks, may be more flexible than the U.S. Department of Education.
If you’ve been denied a Parent PLUS loan because of an adverse credit history, another lender may determine that the issue shouldn’t keep you from being approved for a loan.
While private loans can be an alternative, they may have higher interest rates and fewer borrower protections than federal loans. Be sure to compare terms carefully before deciding.
7. Apply for Additional Direct Unsubsidized Loans
If obtaining a Parent PLUS loan isn’t an option, but your student still needs extra college money, they may qualify for additional federal student loans.
When a Parent PLUS Loan is denied, the borrowing limit for Direct Unsubsidized Loans increases. Dependent students can receive up to $4,000 more per year in their first and second years of college and up to $5,000 more per year in their third year and beyond. This allows them to access more federal financial aid without needing a credit check or a co-signer.
To access these additional funds, students should contact their school’s financial aid office and request an increased loan amount.
