When you apply for a Parent PLUS Loan, you’ll need to undergo a credit check. If the report shows 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 foreclosure, tax lien, previous wage garnishment, repossession, or write-off of previous federal student aid debt.
Unfortunately, some potential borrowers are unaware of their adverse credit history until they apply for a Parent PLUS Loan. Even if you’re denied, other options are still available for you to finance your child’s college education.
Aside from federal Parent PLUS Loans, you may want to consider a private student loan to help pay for your child’s college expenses. Credible lets you compare private student loan rates from multiple lenders, all in one place.
- Borrow additional federal unsubsidized loans
- Find an endorser
- File an appeal to have your application reconsidered
- Consider alternative ways to get your child’s college costs down
Even if you’re denied a Parent PLUS Loan, your child may still qualify for a federal Direct Unsubsidized Loan if they’re considered a dependent student. If your Parent PLUS Loan application has been denied, it’s possible your child’s borrowing limit could be increased.
Depending on your child’s status — whether they’re an undergraduate or graduate student and which term year they’re entering — they may be eligible for an annual loan limit between $6,000 and $20,500 in unsubsidized loans.
It’s important to remember that your child will be responsible for paying back any amount of federal student loans that they borrow. Your child’s school will determine the total loan amount they can borrow, and they’ll be responsible for all interest that accrues on the loan (including any that accrues while they’re attending school).
Your child should speak with their school’s financial aid office before taking out any student loans so they understand their responsibilities.
Applying for an unsubsidized student loan isn’t your child’s only option if your Parent PLUS Loan is denied. Even if you can’t qualify for a Parent PLUS Loan on your own, you can apply with an endorser, also known as a cosigner. An endorser can be anyone other than the student who you’re borrowing money for. The endorser is financially obligated to repay the loan if you can’t.
You can ask anyone to be an endorser on your Parent PLUS Loan, though 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 can’t, you should still consider the full repayment of the loan your sole responsibility. Failure to pay on time or in full will harm both your credit scores.
It’s 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 to compare private student loan rates from various lenders in minutes.
If you’re unable to find an endorser, you may be able to submit an appeal to have your application reconsidered (depending on the circumstances of your credit history).
You’ll submit your appeal to the U.S. Department of Education if you meet one of two criteria:
- The credit report used was incorrect or has been corrected since you’ve been denied.
- You have extenuating circumstances that relate to adverse credit history of the primary PLUS borrower.
Keep in mind that whether you find an endorser or file an appeal to have your application reconsidered, you’ll need to complete PLUS Credit Counseling. The U.S. Department of Education requires this course and you can complete it at any time, though you need to complete it within 30 days of the DOE determining that you have an adverse credit history. You need to complete the course in a single session, which typically takes 20 to 30 minutes.
Student loans are helpful, but they’re not the only way for your child to afford college. You can find alternative ways to lower their cost of attending college without taking out private or federal student loans.
First, your child should investigate all financing options they may be eligible for, including scholarships and grants. They should also speak to their school’s financial aid office directly to determine if they can negotiate a unique payment plan or if they can do anything else to offset the cost of tuition.
Your child also has the option to earn college credits through more-affordable avenues. Consider going to a community college first, then transferring to a university. They can also pursue options to earn credits through university-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.