If you’re helping your college-bound child pay for school, you may have considered taking out loans in your name. If so, one of the options available are Parent PLUS loans, also known as Direct PLUS Loans for Parents, offered through the federal government.
Unfortunately, not all Parent PLUS loan requests are approved. If you’ve found yourself in that camp, and your Parent PLUS loan was denied, now what do you do?
Parent PLUS loans have credit-related requirements to qualify. If your PLUS loan was rejected, it could be because of something found within your credit history or some other inability to meet eligibility requirements.
According to the Federal Student Aid website , PLUS borrowers cannot have an adverse credit history, such as having a debt payment 90 days overdue or having completed bankruptcy in the last five years.
Was your Parent PLUS loan denied? Don’t lose hope yet because you still have options to consider: You could appeal the decision, get an endorser, take out a private loan, have your child request more aid, and search for more scholarships or other educational options with your student.
Appeal the Decision
If you had extenuating circumstances that led to a credit event that got your Parent PLUS loan denied, you can request that the U.S. Department of Education reconsiders your application. To go this route, you will need documentation that proves the circumstances that led to the adverse credit.
It will be up to the U.S. Department of Education to decide whether to approve the appeal. Check their website for a list of potentially acceptable appeals and the documentation needed to support that appeal.
If your appeal is approved, you will also be required to complete PLUS Credit Counseling before your PLUS loan is disbursed.
Counseling takes between 20 and 30 minutes and can all be done online. To complete PLUS Credit Counseling, you’d log into the Federal Student Aid website using your own Federal Student Aid (FSA) ID.
Find an Endorser
Your Parent PLUS loan denial options don’t end there. Next up, you could consider having someone else endorse the Parent PLUS loan. An endorser is essentially a cosigner without an adverse credit history.
In the event that you are unable to repay the loan, the endorser would be responsible. The endorser can be anyone with a non-adverse credit history except for the student for whom the loans are borrowed.
An endorser must complete an addendum online. In order to sign on as an endorser, they’ll need their own FSA ID.
They should expect to be asked for personal information and two personal references. Upon approval of the endorser, you’ll still need to complete PLUS Credit Counseling .
Your Child May Qualify for More Aid
If your Parent PLUS loan is rejected, your child may qualify for more federal student aid. To go this route, your child would contact their school’s financial aid office to see what can be done given that their parental contribution is now reduced.
It’s wise to proceed in this direction with caution. Make sure you talk to your student about student loans so they understand how the loans work and how much they will cost upon graduation. It may be helpful to speak about them in terms of the expected monthly payment, so your student can compare that to their annual expected salary.
It’s likely not too late for your student to apply for scholarships. In fact, students should be looking into scholarships available each and every year of school—not just before freshman year begins.
While some scholarship and grant options may be limited to incoming freshmen, this is not always the case. In addition to looking at scholarships offered by your child’s school and the state, other local organizations may offer scholarships.
Your student may want to kick off their scholarship search with a guidance counselor at their school. Hopefully, this person can provide information on the scholarships themselves and provide some ideas on other ways to search for scholarships, such as the best places to look online.
Consider Other School Options
Perhaps a shortfall in funding and financing to pay for school is one reason to reconsider schooling options. For example, a state school or local community college could save thousands in tuition, room and board, and travel costs.
Some community colleges have transfer programs for getting students into four-year schools. Meet with a counselor at the community college to see what the transfer process is like.
Though it might be unpopular now, your child may thank you in the future for helping guide them towards an option that didn’t leave them strapped with more student loans than they could handle post-graduation.
Private Student Loans
Another way to close the funding gap if your Parent PLUS loan was denied is by using private student loans either for your child or for you to take out. Commercial banks, credit unions, online lenders, and other lending institutions offer private student loans with varying terms and rates.
Private student loans and private parent student loans are not backed by the federal government, and therefore not subject to their qualification rules. That said, if you did not qualify for a Parent PLUS loan, you might also have trouble qualifying for a private loan at a competitive rate.
Still, it’s worth shopping around for loans to see what you find, as every lender will have its own rules about who qualifies for what rates. In addition to comparing those rates, look at all of the costs associated in taking out loans, such as origination fees, prepayment penalties, and so on.
Rates on private student loans are generally determined by your credit score and personal financial situation.
In general, lenders will offer better rates on student loans to those with better credit scores, stronger history of making debt payments, and higher incomes, amongst other considerations.
Private Parent Student Loans With SoFi
If you do determine a private student loan is right for you, check out SoFi. We offer parent student loans that are built to help you pay for your child’s education. They are no fee, low-rate parent student loans.
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