Eligibility for the Federal PLUS Loan, including both the Grad PLUS and Parent PLUS loans, depends on the borrower not having an adverse credit history. Determining whether a borrower has an adverse credit history depends on a recent credit check.
Definition of an adverse credit history
A borrower has an adverse credit history when certain negative events appear on the borrower’s credit report. These events include:
- The borrower has a current delinquency of 90 or more days (a serious delinquency) on more than $2,085 in total debt
- Within the last two years, the borrower has more than $2,085 in total debt in collections or charged off (written off)
- Within the last five years, the borrower has had a bankruptcy discharge, foreclosure, repossession, tax lien, default determination or wage garnishment on any debt, or a write-off of a Title IV federal education loan
Note that the adverse credit history criterion generally considers whether the borrower has previously experienced financial difficulty. It does not consider credit scores, debt-to-income ratios, minimum income thresholds or other measures of future ability to repay the debt.
How to get a PLUS Loan despite an adverse credit history
If a borrower has an adverse credit history, the borrower may qualify for a Federal PLUS Loan by appealing the adverse credit history determination, curing the adverse credit history or by obtaining an endorser.
A borrower can appeal an adverse credit history determination by documenting extenuating circumstances at Studentaid.gov or by calling 1-800-557-7394. Extenuating circumstances may include demonstrating that
- the borrower was not responsible for repaying the debt
- the debt was discharged in a chapter 13 bankruptcy (as opposed to chapter 7, 11 or 12)
- the debt was repaid in full
- the debt was rehabilitated and remains in good standing
- the borrower made satisfactory arrangements to repay the debt
- the credit report contains errors that affect the adverse credit history determination
The borrower can also demonstrate that the adverse credit history no longer applies based on an updated credit report.
If the adverse credit history determination was due to a current delinquency of 90 or more days, the borrower may be to gain eligibility for a Federal PLUS loan by curing the delinquency, such as by bringing the affected accounts current. The borrower will need to wait a few weeks for the change to appear on their credit report, and then reapply for the loan.
The borrower can gain eligibility for a Federal PLUS loan by adding an endorser who does not have an adverse credit history. An endorser is like a cosigner, equally obligated to repay the debt. The endorser cannot be the student on whose behalf the parent is borrowing. Borrowers who qualify for a Federal PLUS Loan with an endorser are required to undergo PLUS loan counseling.