What To Do When a Parent Is Denied a PLUS Loan

A parent PLUS loan is a type of federal student loan available to parents who want to help their child pay for college. With a PLUS loan, you can borrow up to the cost of attendance of your child’s school.

However, unlike other kinds of federal loans, PLUS loans require a credit check—which means you might not qualify if you have less-than-stellar credit.

If your application for a parent PLUS loan was denied, here are some steps you can take as well as alternatives to consider.

Why Was My Application for a Parent Plus Loan Denied?

While the eligibility criteria to qualify for a parent PLUS loan are generally less stringent than those followed by private lenders, it’s still possible to have your application denied in the following situations:

You Have an Adverse Credit History

To be eligible for a parent PLUS Loan, you can’t have an adverse credit history. This doesn’t mean that you need to meet a minimum credit score requirement—instead, you can’t have negative details included on your credit report for the past two to five years, depending on the type of information.

Your credit history will be considered adverse by the Department of Education if your credit report contains:

  • Accounts with balances of $2,085 or more that are delinquent by 90 or more days, have been placed in collections or charged off during the previous two years
  • Defaulted debt within the past five years
  • Bankruptcy discharge listed within the past five years
  • Repossession or foreclosure within the past five years
  • Charge-off or write-off of federal student aid within the past five years
  • Wage garnishment or tax liens within the past five years
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Having even just one of these listed on your credit report will lead to a denial of your PLUS loan application.

You Have a Credit Freeze in Place

Freezing your credit can be a helpful option if you’re concerned about identity theft or other fraudulent activity. However, freezing your credit restricts access to your credit report, which means you won’t be able to open any new credit accounts or take out new loans—including parent PLUS loans.

If there’s a freeze on your credit reports and you apply for a PLUS loan, your application won’t be processed until you lift the freeze.

What To Do If Your Parent Plus Loan Application Is Denied

If your PLUS loan application was denied, here are some options to consider:

Add an Endorser

If your application for a parent PLUS loan is denied because of an adverse credit history, you could qualify for a loan by adding an endorser to your application. Similar to a co-signer, an endorser is someone with good credit who shares responsibility for the loan.

Keep in mind that if you as the primary borrower fail to make your payments, the endorser will be on the hook. Also note that if you plan on adding an endorser, you’ll need to complete PLUS loan credit counseling.

Ask Other Parent to Apply

If you apply for a parent PLUS loan and are denied, consider asking the child’s other parent to apply. The other applicant must be the student’s biological or adoptive parent (or step-parent if they’re married to the custodial parent)—so if you’re divorced or separated, your former partner might still be able to take out a PLUS loan.

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Keep in mind that both parents can apply for a parent PLUS loan if they’re divorced and as long as the total aid package doesn’t exceed the student’s cost of attendance. Also note that the following are ineligible for a PLUS loan unless they’ve adopted the student:

  • Grandparents
  • Legal guardians
  • Older siblings
  • Uncles or aunts
  • Widowed step-parents

File an Appeal

In some cases, you can appeal a PLUS loan denial if you provide documentation that shows extenuating circumstances related to your adverse credit history. Keep in mind that this doesn’t apply to loss of employment or illnesses—the extenuating circumstances must be specifically associated with your credit.

For example, you might be able to claim extenuating circumstances in the following situations:

  • Your credit report lists a repossession, but you have a final divorce decree showing you’re not responsible for the debt.
  • Your wages have been garnished, but you have documentation on official letterhead showing the garnishment was released or paid in full.
  • Foreclosure proceedings have begun, but you have a finalized, signed and notarized loan modification agreement and proof of payment in accordance with that agreement.

If you have extenuating circumstances and decide to appeal a PLUS loan denial, you can begin the process online at StudentAid.gov.

Remove Credit Freeze

If you have a credit freeze on your credit reports, you can easily have it removed to allow your PLUS loan application to be processed. To do so, simply visit each of the three credit bureaus online to manage the freeze:

  • Equifax
  • Experian
  • TransUnion

3 Alternatives to Parent Plus Loans

If you still aren’t able to take out a parent PLUS loan, here are a few alternatives that could help your child pay for college:

1. Look into Other Federal Student Loans

In addition to parent PLUS loans, your student can consider direct subsidized or unsubsidized loans. Here’s how they work:

  • Direct subsidized loans are available to dependent undergraduate students with financial need. The government covers all the interest that accrues on subsidized loans while the student is in school and during grace periods.
  • Direct unsubsidized loans are available to undergraduate and graduate students regardless of financial need. Unlike with subsidized loans, the student is responsible for all accrued interest on unsubsidized loans. If you’re denied parent PLUS loans, your child might also be able to borrow a higher amount of unsubsidized loans than normal. Contact their school’s financial aid office for more information.
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2. Apply for Scholarships and Grants

Unlike student loans, scholarships and grants don’t have to be repaid—which makes them a great way to pay for school. There’s no limit to how many of these awards your child can get, so it’s a good idea for them to apply for as many as possible. Organizations that commonly provide scholarships and grants include:

  • Local and national businesses
  • Nonprofit organizations
  • Professional associations in your child’s field of study

Your child might also be eligible for school-based scholarships depending on the information they provide when filling out the Free Application for Federal Student Aid (FAFSA).

3. Consider Private Student Loans

After exhausting scholarship, grant and federal student loan options, private student loans could help your child fill any funding gaps left over. However, you’ll typically need good to excellent credit to qualify for a private student loan—so if you have an adverse credit history, you’ll likely have a hard time getting approved for a private parent student loan.

If your child is unable to qualify on their own, they could consider applying with a creditworthy co-signer. Keep in mind that a co-signer can be anyone with good credit who is willing to share responsibility for the loan, such as another relative or trusted adult.