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. If your Parent PLUS Loan application is denied, you might try to appeal the decision, find an endorser for the application, or look into other funding options.
What Is the Parent PLUS Loan Program?
The Parent PLUS Loan Program falls under the umbrella of federal student loans. The Direct Loan Program offers PLUS Loans to graduate or professional students, or parents. When a PLUS loan is borrowed by a parent it is often referred to as a Parent PLUS Loan. Unlike other types of federal student loans, PLUS loans require a credit check.
Most schools require parents to apply for a PLUS Loan by filling out an online application, though some schools may have an alternate process. Before filling out the online application for a Parent PLUS Loan, the student must fill out the FAFSA® or Free Application for Federal Student Aid.
Why a Parent PLUS Loan Might Be Denied
Unfortunately, some Parent PLUS loans are denied. If you’ve found yourself in that camp, 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, maybe consider taking out a private loan, have your child request more aid, and search for more scholarships or other educational options with your student.
Parent PLUS Loan Denial Options
In the event that your application for a Parent PLUS Loan is denied, these options could be worth considering.
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 reconsider your application. To go this route, you will need documentation that proves that extenuating 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 would still need to complete PLUS Credit Counseling .
Your Child May Qualify for More Aid
If your Parent PLUS loan is rejected, there is a chance that 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.
If your student is still in high school, their guidance counselor may be able to provide some insight on ways to search for scholarships or local opportunities that they may qualify for.
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. Consider meeting with a counselor at the community college to see what the transfer process is like.
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Private Student Loans After Parent PLUS Loan
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 and may lack the borrower protections available to federal loans, such as deferment. For this reason, private student loans are generally considered as a last resort. That said, those borrowers who did not qualify for a Parent PLUS loan, 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.
Parent PLUS Loans are federal loans available to parents of students. There are credit-related requirements in order to qualify for a PLUS loan, so in some cases, it is possible to be denied for a Parent PLUS Loan. In that case, applicants may be able to appeal the decision, add an endorser to the loan, or look into other funding solutions, one of which may include looking into private student loans.
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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