What to do if your Parent PLUS loan application was refused

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When you are denied a Parent PLUS loan, you have the option of appealing, finding another co-signer, or taking out unsubsidized federal student loans to help pay for your child’s education. (Shutterstock)

When you apply for the Parent PLUS loan, you must submit to a credit check. If the report indicates that you have an adverse credit history, your application may be denied. You may have an adverse credit history if your credit reports show a prior garnishment, tax lien, wage garnishment, repossession, or write-off of federal student aid debt.

Unfortunately, some potential borrowers are unaware of their poor credit history until they apply for a Parent PLUS loan. Even if you are refused, other options are available to you to finance your child’s college education.

In addition to federal Parent PLUS loans, you can consider a private student loan to help pay for your child’s college expenses. Credible allows you compare private student loan rates from multiple lenders, all in one place.

Borrow additional unsubsidized federal loans

Even if you are denied a Parent PLUS loan, your child may still qualify for a direct unsubsidized federal loan if they are considered a student dependent. If your Parent PLUS loan application has been declined, your child’s borrowing limit may be increased.

Depending on your child’s status — whether they’re undergraduate or graduate and what year they’re entering — they may qualify for an annual loan limit of between $6,000 and $20,500 in unsubsidized loans.

It is important to remember that your child will be responsible for repaying any federal student loan amount they borrow. Your child’s school will determine the total loan amount they can borrow and will be responsible for all interest accrued on the loan (including interest that accrues while they attend school).

Your child should speak with their school’s financial aid office before taking out a student loan so they understand their responsibilities.

Find an endorser

Apply for an unsubsidized student loan is not your child’s only option if your Parent PLUS loan is denied. Even if you cannot qualify for a Parent PLUS loan on your own, you can apply with an endorser, also known as a co-signer. An endorser can be anyone other than the student you are borrowing money for. The endorser is financially obligated to repay the loan if you cannot.

You can ask anyone to be an endorser on your Parent PLUS loan, although many borrowers tend to ask other family members. Keep in mind that although your endorser has a legal obligation to repay the loan if you cannot, you should always consider paying off the loan in full as your sole responsibility. Failure to pay on time or in full will hurt both your credit ratings.

It is important to understand how student loans work before borrowing any amount.

Consider a private student loan if your Parent PLUS loan is denied. Visit Credible for compare private student loan rates from various lenders in minutes.

Appeal to have your application reconsidered

If you are unable to find an endorser, you may be able to appeal to have your application reconsidered (depending on the circumstances of your credit history).

You will submit your appeal to the U.S. Department of Education if you meet one of the following two criteria:

  • The credit report used was incorrect or has been corrected since you were denied.
  • You have extenuating circumstances related to the primary PLUS borrower’s adverse credit history.

Remember that whether you find an endorser or appeal to have your application reconsidered, you will need to complete PLUS Credit Counseling. The US Department of Education requires this course and you can take it anytime, although you must take it within 30 days of the DOE determining that you have an adverse credit history. You must complete the course in one session, which usually takes 20-30 minutes.

Consider other ways to reduce your child’s tuition

Student loans are helpful, but they are not the only way your child can pay for their education. You can find other ways to reduce the cost of their college education without taking out private or federal student loans.

First, your child should investigate all funding options they may be eligible for, including scholarships and grants. They should also speak directly to their school’s financial aid office to determine if they can negotiate a one-time payment plan or if there is something else they can do to offset tuition.

Your child also has the option of earning college credit through more affordable means. Consider going to a community college first and then transferring to a university. They may also seek options for earning credit through college-approved seminars, continuing education courses, or College Level Examination Program (CLEP) exams.

If you decide that private student loans are the right course for you, visit Credible, where you can compare private student loan rates without affecting your credit.

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