4 Next Steps If You’re Denied a Parent PLUS Loan

Although financing the burden of higher education generally falls on students through federal student loans. Parents often assume that burden, too, through Parent PLUS Loans.

Unlike federal loans for student borrowers, Parent PLUS Loans require a credit check and if your credit isn't up to par, you could be denied a loan. However, all hope is not lost if you are denied a Parent PLUS Loan.

How to qualify for a Parent PLUS Loan

A Parent PLUS Loan is a federal student loan offered by the U.S. Department of Education. Under the Direct Loan program, it lets parents borrow up to a school’s cost of attendance, minus existing financial aid their child receives, at a fixed interest rate.

To receive a Parent PLUS Loan, you must be a qualifying parent of a dependent undergraduate student who’s attending an eligible school at least half-time. Grandparents and legal guardians do not qualify for these loans.

Parent PLUS Loans are the only federal loan that requires a credit check for approval. You can't have an adverse credit history to receive approval for a Parent PLUS Loan.

Parents can apply for a Parent PLUS Loan through the Federal Student Aid website. You'll need to gather specific information before applying, including your:

• Verified FSA ID
• School name
• Student's information
• Personal information
• Employer's information

Since credit history is a major factor for the loan application, parent borrowers who’ve placed a security freeze on their credit report will need to lift the freeze before applying for the loan.

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Reasons parents are denied for Parent PLUS Loans

The primary reason for Parent PLUS Loan denial is having an adverse credit history. When applying for a Parent PLUS Loan, you’re subject to a credit check based on the Department of Education’s standards.

Long-term delinquency or debt in collections is one reason your Parent PLUS Loan eligibility might be adversely affected. This includes any debt with a total combined outstanding balance greater than $2,085 that’s delinquent for 90 days or more, has been placed in collections or charged off during the past two years.

Any of the following events within the last five years are also considered red flags:

• Default determination
• Discharge of debts in bankruptcy
• Foreclosure
• Repossession
• Tax lien
• Wage garnishment
• Write-off of a federal student aid debt

There are some circumstances when you might still qualify for a Parent PLUS Loan, which we’ll discuss in more detail below. The Department of Education will contact you with options if you are denied a Parent PLUS Loan.

4 Options if you’re denied a Parent PLUS Loan

Not getting approved for a federal Parent PLUS Loan is disheartening, especially since you applied to help fund your child's education. You still have options, though, if you were denied for a Parent PLUS Loan.

1. File an appeal

Parents can file an appeal after being denied a Parent PLUS Loan. Reach out to your school's financial aid office as soon as possible to get the appeal process started.

You'll need to prove that extenuating circumstances led to your adverse credit history and that your credit is trending in the right direction. Gather and share any documentation that attests to your extenuating circumstances. Parents who appeal a decision must also complete PLUS Credit Counseling.

2. Enlist an endorser or cosigner

Another option for parents is to use an endorser. An endorser is similar to a cosigner and is financially responsible to pay off your loan if you don't. Endorsers are also subject to credit checks and must meet the same credit requirements for approval. Any parent using an endorser on a Parent PLUS Loan must also complete PLUS Credit Counseling.

3. Get a parent student loan through a private lender

If neither of those options is possible, you may need to venture outside of the federal government for financial assistance. Several private lenders offer parent student loans to help fund a child's education. Lenders who offer parent student loans include:

• College Ave
• SoFi
• Education Loan Finance (ELFI)
• Citizens
• Brazos

Similar to Parent PLUS Loans, private lenders perform a credit check to determine eligibility for a parent loan. Specific requirements, however, vary from lender to lender.

4. Have your child borrow additional unsubsidized loans

If you were denied a Parent PLUS Loan and aren't eligible through an appeal or other route, your child might need to borrow additional unsubsidized loans to pay for school.

Unsubsidized student loans are loans available for undergraduate and graduate students. Borrowers don't need to demonstrate financial need to qualify for an unsubsidized loan but are responsible to pay interest on the loan during all periods, including during school.

Contact the school to learn about available options.

Even if you planned to pay for your child's education, they should still fill out and submit a Free Application for Federal Student Aid (FAFSA) every year, starting their senior year of high school. Schools use information from the FAFSA form to determine eligibility for financial aid including scholarships, grants, work-study programs and federal student loans.

Funding your child's education

Helping your child cover their educational expenses is one way to help them get ahead without the burden of mounting student loan debt. Check your credit report in advance to determine eligibility for a Parent PLUS Loan. You can obtain free copies of your credit report from all three major credit bureaus at AnnualCreditReport.com.

Even if you have issues with your credit, there’s no harm in applying for a Parent PLUS Loan anyway. You might still qualify, especially if you can prove why you have adverse credit or want to add an endorser. If not, explore other ways to support your child’s education.