If your application for a federal Parent PLUS Loan was denied, you and your child still have options to help pay for their college. Below, we’ll explain some reasons why a Parent PLUS loan application might be denied, what you can do if yours is rejected, and alternatives to consider.
What Is the Parent PLUS Loan Program?
Parent PLUS Loans are federally funded Direct PLUS Loans taken out by parents to help their child pay for college. To apply, students or their parents must first fill out the Free Application for Federal Student Aid. Then a parent applies for a Parent PLUS Loan on the Federal Student Aid site. Most schools require this to be done online, though some have a different application process. Unlike other types of federal student loans, these loans require a credit check.
Why a Parent PLUS Loan Might Be Denied
If your Parent PLUS Loan was rejected, it may be because you don’t meet the credit requirements. PLUS borrowers can’t have an adverse credit history, such as being at least 90 days overdue in making a debt payment or completing bankruptcy in the last five years.
Your application may also be denied if you or your child don’t meet other PLUS loan requirements. For instance, your child must be enrolled at least half-time at an eligible school, and you must meet the general eligibility criteria for federal student aid.
What Parents Can Do
In the event that your application for a Parent PLUS Loan is rejected, you may want to consider these options.
Appeal the Decision
If you had extenuating circumstances that led to an adverse credit event, you can ask the U.S. Department of Education to reconsider your application. You’ll need to provide documentation that proves that extenuating circumstances led to the adverse credit. The DOE will decide whether to approve the appeal. Check its website for a list of potentially acceptable appeals and the supporting documentation needed.
If your appeal is approved, you’ll be required to complete PLUS Credit Counseling before your loan is disbursed. Counseling takes between 20 and 30 minutes and can be done online.
Find an Endorser
You may want to consider having someone else endorse the Parent PLUS loan. An endorser is essentially a cosigner without an adverse credit history. In the event that you are unable to repay the loan, the endorser would be responsible.
An endorser must complete an addendum online. They should be prepared to provide personal information such as their mailing address and phone number and their employer’s information, plus two references. Once the endorser is approved, they’ll need to complete PLUS Credit Counseling before the funds are disbursed.
Your Child May Qualify for More Aid
If your Parent PLUS loan is rejected, there’s a chance your child may qualify for more federal student aid. They can contact their school’s financial aid office to see what can be done given that their parental contribution is now reduced.
It’s important to talk to your child about student loans so they understand how the loans work and how much they will cost upon graduation. It may be helpful to speak in terms of the expected monthly payment, so your student can compare that to their expected annual salary.
Scholarships
It’s likely not too late for your student to apply for scholarships. In fact, students should be searching for scholarships each and every year they’re in school.
While some types of scholarships may be limited to incoming freshmen, this is not always the case. In addition to looking at scholarships offered by your child’s school and the state, other local organizations may offer scholarships.
If your student is still in high school, their guidance counselor may be able to provide advice on ways to search for scholarships, including finding opportunities in your area.
Consider Other School Options
Depending on where you live, you may want to reconsider where your child goes to school. Switching to a state school or local community college could save thousands in tuition, room and board, and travel costs. Some community colleges even have transfer programs for getting students into four-year schools. Consider meeting with a counselor at the community college to see what the transfer process is like.
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Private Student Loans After Parent PLUS Loan
Private student loans are another way to close the funding gap. Commercial banks, credit unions, online lenders, and other lending institutions offer these loans with varying terms and rates. Private student loans and private parent student loans are not backed by the federal government and therefore not subject to its qualification rules. They may also lack the borrower protections available to federal loans, such as deferment. Private student loans are often considered once all federal aid options have been explored.
Rates on private student loans are generally determined by your credit score and personal financial situation. Borrowers who did not qualify for a Parent PLUS loan may also have trouble qualifying for a private loan at a competitive rate. Still, it’s worth shopping around. In addition to comparing rates between lenders, you’ll want to factor in the costs associated with taking out a loan, such as origination fees, prepayment penalties, and more.
The Takeaway
Parent PLUS Loans are federal loans available to parents of students. There are credit-related requirements in order to qualify for a PLUS loan, so in some cases, it is possible to be denied for a Parent PLUS Loan. If your application is rejected, you still have options, including appealing the decision, adding an endorser to the loan, exploring scholarships, or looking into alternate schools.
If you’ve exhausted all your options, no-fee private parent college loans from SoFi can help you pay for your student’s education. The application process can be completed easily online, and you can see rates and terms in just a few minutes. Repayment plans are flexible, helping parents find an option that works for their financial plan and budget.
FAQ
How often can I take out a Parent PLUS Loan?
You can apply each year you want to receive a Parent PLUS loan. To do so, you must fill out a Direct PLUS Application.
When do Parent PLUS Loans need to be paid back?
Repayment begins 60 days after final disbursement for that academic year. If you’re approved for deferments each year, you may not need to begin repaying the loan until 6 months after your child graduates.
If I’m approved for a Parent PLUS Loan, where will the funds go?
Funds from Parent PLUS Loans are sent directly to your child’s school.
SoFi Private Student Loans
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