What Do I Do If My Federal Parent Plus Loan Is Denied?

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Erica Gellerman

By Erica Gellerman

April 6, 2022

Are you frustrated because your Parent PLUS loan was denied? Don’t worry; there are still opportunities for your child to receive the aid they need for their education.

Eligibility Criteria for a Parent PLUS Loan

First, it’s good to know the qualification criteria to understand potential reasons why your loan request was denied.

In order to be eligible for a Parent PLUS loan, you’ll need to meet the following eligibility requirements:

  • You must be the biological or adoptive parent of the student.
  • Stepparents are eligible to borrow a Parent PLUS Loan while they are married to the student’s custodial parent.
  • Your student must be a dependent undergraduate student enrolled at least half-time in a college that is eligible for Title IV federal student aid and participates in the Direct Loan program. (Some community colleges have intentionally opted out of the Direct Loan program to preserve eligibility for the Federal Pell Grant. If a college has too high a cohort default rate, it can lose eligibility for all federal student aid, not just student loans.)
  • You cannot have an adverse credit history, though there are some exceptions for extenuating circumstances.
  • You and your child must be U.S. citizens or eligible non-citizens, not be in default on federal loans, and must meet other general eligibility requirements.

If you fail to meet any of these criteria, you might find that your loan application is denied. If that’s the case, there are some options you should consider.

Obtain an endorser

If you’ve been denied a Parent PLUS loan because of an adverse credit history, you can qualify for the loan if you obtain an endorser.

An endorser is like a cosigner. The endorser agrees to repay the PLUS loan if the parent defaults or is otherwise unable to repay the debt.

The endorser can’t have an adverse credit history. The endorser also cannot be the student on whose behalf the PLUS loan is borrowed.

If you obtain an endorser for your PLUS loan, you’ll need to complete PLUS Loan Credit Counseling.

Identify extenuating circumstances

Another option to qualify for a Parent PLUS Loan, despite an adverse credit history, is to explain any extenuating circumstances related to the adverse credit. There are several extenuating circumstances that may still allow you to qualify for a Parent PLUS loan. This includes situations such as:

  • A satisfactory repayment agreement between you and a creditor with at least six months of on-time payments.
  • A divorce decree showing that you aren’t responsible for the debt.
  • Proof that the debt in question was included in a bankruptcy filing.

The U.S. Department of Education has published a more comprehensive list of extenuating circumstances.

If the U.S. Department of Education is satisfied that your extenuating circumstances qualify you for the loan, you’ll need to complete PLUS Loan Credit Counseling.

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Document incorrect information

Review the adverse credit decision for any mistakes. If the information that is resulting in adverse credit is incorrect, you’ll need to document this for the U.S Department of Education and appeal the loan denial.

Bring delinquent accounts current

If you’ve been denied a Parent PLUS Loan because of an adverse action from a delinquent account, you can fix this by making payments to bring that account current. Once you do that you can either re-apply for the Parent PLUS Loan or explain it as an extenuating circumstance. If you re-apply for the Parent PLUS Loan, you may need to wait until the change in the delinquent account’s status is reflected in your credit report.

Have another parent apply

Is there another parent who can apply for the loan? Remember, biological or adoptive parents are eligible for a Parent PLUS loan. Stepparents may be able to apply in some cases, which is an option to consider.

If the other parent doesn’t have an adverse credit history, they may qualify for a Parent PLUS Loan.

Consider private lenders

You may want to consider private student loans and private parent loans. The credit criteria for private loans differ from the U.S. Department of Education. Some lenders, such as credit unions and community banks, may be more flexible than the U.S. Department of Education. If you’ve been denied a Parent PLUS loan because of adverse credit history, another lender may determine that the issue shouldn’t keep you from being approved for a loan.  

Apply for Additional Direct Unsubsidized Loans

If obtaining a Parent PLUS loan isn’t an option, but your student still needs extra money for college, they may be able to qualify for additional federal student loans.

Dependent students whose parents don’t qualify for a Parent PLUS Loan may qualify for additional unsubsidized Federal Direct Stafford Loans, the same limits as are available to independent students.

While you aren’t the borrower, your child is still able to receive the additional funds that they need to pay for their education.

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