You should apply for a Parent PLUS loan, even if you are not eligible


March 31, 2021

Note that the student loan situation has changed due to the impact of the coronavirus outbreak and the relief efforts of the government, student loan lenders and others. Check out our Student Loans Hero Coronavirus Information Center for news and additional details.

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

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

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

How ‘Adverse Credit’ Can Kill a Parent PLUS Application

Not all parents will be eligible for a parent PLUS loan. Every parent PLUS loan application includes a credit check to examine your borrowing history.

While your credit score is not a factor, other information on your credit report could be. Specifically, the PLUS parent loan application uses the credit check to look for “bad credit.”

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

The Federal Student Aid Office of the United States Department of Education classifies adverse credit as a history that includes one (or both) of the following:

  • Debt of $ 2,085 or more that, within the past two years, has been sent to collection, written off, or 90 days or more past due
  • One of the following events in the past five years:
    • Default determination
    • Debt paid by bankruptcy
    • Foreclosure
    • Repossession
    • Tax privilege
    • Wage garnishment
    • Federal student loan or other assistance debt written off

Your parent PLUS loan will be refused if you have adverse credit as defined above. To be approved, on the other hand, you must have non-bad credit, which means that it is free from these major negative credit scores.

Fortunately, many parents can meet the credit requirements of a PLUS parent loan application. Even if you don’t have enough credit to get 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 bad credit

If you have bad credit, don’t cancel PLUS Parent Loans right away.

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

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

  • Obtain 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 from is not eligible to act as your sponsor.
  • Document extenuating circumstances: You can appeal the adverse credit classification if you can prove that your adverse credit decision is based on incorrect, incomplete, or out of date 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 any of the above requirements, you will also need to take 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 your child pay for their education.

If you need to borrow PLUS Parent Loans in the future, be aware that “pre-approval based on extenuating circumstances does not guarantee further approvals,” according to the PLUS Parent Loan Forms.

How a Denied Parent PLUS Application Can Still Help Your Student

If you know that you have bad credit and are unable or unwilling to go through the appeal process, it is always worth applying for a parent PLUS loan.

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

Undergraduates face tough limits when it comes to student loans. Dependent students can borrow subsidized direct loans and unsubsidized direct loans only within the following limits:

  • $ 5,500 to $ 7,500 per year, with higher limit given to students in the upper class
  • $ 31,000 total for life

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

  • $ 9,500 to $ 12,500 per year, the higher limit being given to students in the upper classes
  • $ 57,500 total for life

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

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

The parent PLUS loan application includes a credit check, but that doesn’t stop you from filling out and submitting the forms. It is possible that you can secure these loans even if you do not meet the non-adverse credit conditions.

And even if your parent’s PLUS loan denial is not in dispute, your student may have better access to affordable financing.

Rebecca Safier contributed to this report.

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