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What Happens if I'm Denied for a Parent PLUS Loan?

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If you apply for a Parent PLUS Loan and are denied, you may be wondering what your alternatives are for financing your child’s college education.  The good news is that you have a few options available to you.

Obtain an Endorser

If your initial Parent PLUS Loan application is denied, then you can try to obtain an endorser for your Parent PLUS Loan application.  An endorser is a creditworthy cosigner, other than your student, who agrees to repay the PLUS Loan if you cannot.  The option to obtain an endorser is presented online at the end of the PLUS Loan application process. Endorsers are required to complete an Electronic Endorser Addendum.  You, the parent borrower, are required to complete PLUS Credit Counseling online in addition to signing a Master Promissory Note.

Provide Documentation of Extenuating Circumstances

Also at the end of the online application for PLUS Loans, you have the option of documenting extenuating circumstances pertaining to an adverse credit history.  A few examples of qualifying extenuating circumstances are:

  • Debt that was included in a Chapter 13 bankruptcy (not a Chapter 7, 11, or 12 bankruptcy);

  • Divorce decree that absolves a divorcee of responsibility for repaying a debt;

  • Consolidation of a defaulted federal student loan (the consolidated loan cannot be delinquent); and

  • Derogatory events, such as a bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or default determination, that occurred more than five years ago.

To pursue this option, you need to formally appeal the credit decision.  If your appeal is approved, you will be required to complete PLUS Credit Counseling online in addition to signing a Master Promissory Note.

The Silver Lining

If you cannot find an endorser or document extenuating circumstances, then there is one upside to being denied for a Parent PLUS Loan.  The Federal Student Aid Office allows children with parents who have been denied for PLUS Loans to borrow above the maximum limits normally applied, both annually and in total.  Students whose parents have been denied can borrow up to $9,500 to $12,500 per year (depending on the student’s year in school) with a maximum lifetime borrowing limit of $57,500.  By contrast, students whose parents have not been denied for a Parent PLUS Loan can borrow up to $5,500 to $7,500 per year with a maximum lifetime borrowing limit of $31,000.

Consider Other Alternatives

Scholarships, grants, and work-study positions are alternative forms of financial aid worth pursuing fully, as these types of student assistance do not need to be paid back.  Parents and students may also apply for student loans from private lenders, although private student loans offer none of the protections and flexible repayment options associated with federal loans.  State-sponsored education loans may also be available, though state loan programs typically require borrowers to pass a credit check. Lastly, some schools allow students to break up tuition payments over the course of a semester, rather than paying the entire amount due at the beginning of the term.

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