You should apply for the Parent PLUS Loan, even if you won’t qualify

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March 31, 2021

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If you have adverse credit, your parent PLUS loan application may be denied. However, it is still worth applying as there may be workarounds to getting your loan approved.

And even if your attempts are unsuccessful, the rejection of your Parent PLUS loan application could actually to help your child gets more money for college.

Let’s look at the following topics to find out if you qualify for a PLUS parent loan – and what to do if you can’t:

How “adverse credit” can kill a parent request PLUS

Not all parents will be able to qualify for a PLUS parent loan. Each The parent PLUS loan application includes a credit check to review your borrowing history.

Although your credit score is not a factor, other information on your credit report may be. Specifically, the parent’s PLUS loan application uses the credit check to look for “adverse credit.”

Adverse credit includes a history with significant derogatory marks, which could show that you have recently struggled to repay and responsibly manage your debt.

The U.S. Department of Education’s Federal Bureau of Student Assistance classifies adverse credit as a history that includes one (or both) of the following:

  • Debt of $2,085 or more that in the past two years has been sent to collections, written off, or past due for 90 days or more
  • One of the following events within the last five years:
    • Default determination
    • Debt discharged by bankruptcy
    • Foreclosure
    • Repossession
    • Tax privilege
    • Payday entry
    • Federal student loan or other aid debt written off

Your Parent PLUS Loan will be declined if you have Adverse Credit, as defined above. To be approved, on the other hand, you must have non-adverse credit, which means free from those major negative credit marks.

Fortunately, many parents can meet the credit requirements on a parent PLUS loan application. Even if you don’t have strong enough credit to be approved for a private student loan, you may still qualify for the less stringent PLUS loan.

How to Apply for a Parent PLUS Loan if You Have Adverse Credit

If you have bad credit, don’t write off parents MORE ready for now.

According to Federal Student Aid, parents with adverse credit can still access these loans. They will only need to take additional action on their parent PLUS loan application.

You have two options for trying to get approved for a PLUS parent loan if you have adverse credit:

  • Get an endorser: Similar to a co-signer on a loan, an endorser is someone who agrees to repay the parent PLUS loan if you don’t. This endorser will be subject to a credit check and must meet the non-adverse credit requirement. The student you are borrowing for is not eligible to act as your endorser.
  • Document extenuating circumstances: You can appeal the adverse credit classification if you can prove that your adverse credit decision was based on incorrect, incomplete or outdated information. You must fully document the extenuating circumstances related to the debt. A member of the Department of Education will review this documentation and determine approval or denial on a case-by-case basis.

In addition to meeting one of the above requirements, you will also need to complete a PLUS credit counseling course.

If you can meet these requirements, your parent PLUS application will be approved and you can get the loans you need to help pay for your child’s education.

If you need to borrow PLUS parent loans in the future, be aware that “previous approval based on extenuating circumstances does not guarantee further approvals,” according to PLUS parent loan forms.

How a Denied Parent PLUS Request Can Still Help Your Student

If you know you have bad credit and can’t or don’t want to go through the appeals process, it’s still worth applying for a Parent PLUS loan.

While a PLUS parent rejection can be a setback to your plans to pay for college, it also comes with a surprising benefit. Specifically, the Federal Office of Student Aid will provide a higher amount of student loans to students who have a parent who has been denied a parent PLUS loan.

The face of undergraduates strict ceilings for student loans. Dependent students may borrow Direct Subsidized Loans and Direct Unsubsidized Loans only within the following limits:

  • $5,500 to $7,500 per year, with the higher limit given to higher classes
  • $31,000 lifetime total

Once students have reached these limits, they must look to other sources of funding to cover their college fees. But what about when parent PLUS loans aren’t an option because the parent can’t qualify? In these cases, a student’s loan limits increase:

  • $9,500 to $12,500 per year, with the higher limit given to higher classes
  • $57,500 lifetime total

In fact, your family will pay lower interest rates and fees if your student can borrow more Subsidized Direct Loans and Unsubsidized Direct Loans than you would if you had parent PLUS loans. These undergraduate loans currently have interest rates of just 2.75%, for example, compared to the 5.3% rate on parent PLUS loans.

Why It’s Usually Worth Applying for a Parent PLUS Loan

The parent PLUS loan application includes a credit check, but don’t let that stop you from completing and submitting the forms. You may be able to secure these loans even if you do not meet the non-adverse credit requirement.

And even if your parent’s PLUS loan denial isn’t successfully challenged, your student might have better access to affordable financing.

Rebecca Safier contributed to this report.

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