Parent PLUS Loan Denied? What to Do Next
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If you're denied a federal parent PLUS loan, it's likely because you don't meet the credit requirements. But that denial isn’t always the last word — you may be able to:
Appeal the decision with the Department of Education.
Get an endorser who can qualify for a parent PLUS loan.
Borrow a parent student loan from a private lender.
Here's why you might be denied a parent PLUS loan, as well as what you can do to still help finance your child's education.
Reasons parents are denied PLUS loans
You'll be ineligible for a parent PLUS loan if you have adverse credit history on your credit report. Adverse credit history is a negative mark on your credit report, such as a tax lien or debt payment that's more than 90 days late.
You may also be denied if you or your child doesn't meet other parent PLUS loan eligibility requirements. For example, your child must be an eligible undergraduate student and you must be a U.S. citizen.
Appealing a parent PLUS loan denial
If your parent PLUS loan denial was due to extenuating circumstances or incorrect information on your credit report, you can appeal the decision by providing a written statement and documentation to the Department of Education.
The documentation you'll include will depend on your situation. For example, if a foreclosure is listed on your credit, you'd need to show the mortgage is paid in full, a short sale has been completed or provide other proof you no longer owe the debt.
Events that may have led to credit issues, such as losing a job, typically do not qualify as extenuating circumstances.
After filing an appeal, the decision is left to the Department of Education. If your loan is approved, you’ll need to complete credit counseling on the federal student loan website.
How to get a parent PLUS loan with bad credit
If your appeal is unsuccessful or you have bad credit, you can still get a parent PLUS loan by adding an endorser to your application.
The endorser also cannot have adverse credit history and, like a co-signer, will be legally responsible to repay the loan if you can’t. The child benefitting from the parent PLUS loan cannot be your endorser.
An endorser will need an FSA ID, then they must complete an addendum online. If your endorser is approved, you're expected to complete credit counseling on the federal student loan website.
What happens if you're denied a PLUS loan?
Even if you know you're ineligible for a parent PLUS loan, it can still make sense to apply. That's because there's one potential benefit from being denied: the amount of student loans your child can get will increase.
For their first and second years in school, an additional $4,000 in unsubsidized funds is available — bringing the total they can borrow in federal loans each year to $9,500 and $10,500, respectively. For their third year and beyond, $5,000 in extra unsubsidized loans is available, increasing a student's annual maximum to $12,500.
After your child exhausts federal aid, consider borrowing privately to cover any remaining costs. You can borrow a parent loan for your student from a bank, credit union or online lender. To qualify for a private parent loan, you’ll typically need a good credit score and a steady income.
If your credit history was the reason you were denied a PLUS loan, make sure you can afford to take on parent loans. Private loans will likely have higher interest rates than federal options. You may need a co-signer for approval or a lower interest rate.
» MORE: Parent PLUS loan calculator
