You probably want the good news first, so here it goes: Even if you (or your parent) have bad credit, you can secure a Direct PLUS Loan from the federal government.
The bad news actually isn’t so bad: To get the loan, you might have to complete 20 to 30 minutes of free PLUS Credit Counseling.
The counseling is especially important because Direct PLUS Loans come with the highest interest rate (7.00%) and loan fee (4.276%) among federal loan options. That hinders repayment for Parent PLUS Loan borrowers or graduate students taking out PLUS Loans.
But counseling could make it easier.
Why you might need student loan counseling
If you’ve already applied for a PLUS Loan, then you might be familiar with the Federal Student Aid website. The Department of Education (DOE) website allows you to complete entrance counseling, plus other mandatory and optional training upon taking out your loans.
In the case of PLUS Credit Counseling, you might need to complete it while you wait for your loan application to be approved. More likely, you’ll complete it after having your application denied.
The DOE requires that applicants — either postgraduate students or the parents of undergraduate students — complete this counseling if they have an adverse credit history. That’s defined as having a debt of at least $2,085 that is at least 90 days delinquent, according to Federal Student Aid.
It’s also defined as having any of the following within the past five years on your latest credit report:
- Default determination
- Discharge of debt in bankruptcy
- Tax lien
- Wage garnishment
- Write-off of a federal student aid debt
If your PLUS Loan application is denied, you’ll need to either obtain an endorser or prove extenuating circumstances led to your adverse credit history. An endorser is someone who agrees to repay the PLUS Loan if you fail to do so.
Afterward, you’ll need to complete your student loan counseling online.
How to complete PLUS Credit Counseling
The Federal Student Aid website offers credit counseling for Parent PLUS borrowers and independent postgraduate students taking out PLUS Loans.
Although there are free demos of the virtual counseling, you’ll need an FSA ID (formerly the Federal Student Aid Pin) to complete it. If you’re a parent, you’ll need to use your own FSA ID – you can’t use your child’s. You can create an FSA ID in five minutes or less but might need to wait 24 hours to have your credentials approved.
Beyond your loan information, which will be pulled into the counseling automatically via the National Student Loan Data System (NSLDS), you’ll need details on your earnings, such as:
- Tax filing status
- Adjusted gross income
- Family size
- State of residence
You’ll also need to fill out specifics on your living expenses, like:
- Credit card payments
You’ll have the option of adding more expenses as you see fit. Rough estimates are all that’s required to progress through the loan counseling. But the more data points you can enter into the tool, the better information it will pump out.
Although much of this counseling is dictatorial, significant portions of it are interactive. You’ll even be asked quiz questions to ensure you’re not mindlessly clicking along.
Entering your loan, income, and expenses can inform you about your future as a borrower. The advice is one-size-fits-all, but the numbers are yours.
A Parent PLUS Loan borrower earning $50,000 in adjusted gross income while keeping expenses low could be presented with this helpful visual:
What’s covered in PLUS Credit Counseling
The first section allows you to assess your loan situation. There’s more besides taking your loan details, income, and expenses to estimate your monthly budget for repayment. You can also plug your information into the website’s loan repayment estimator to see which repayment plan is best for you (and whether you might be eligible for loan forgiveness).
For an even more holistic view, Parent PLUS Loan borrowers will be able to include their other federal loans. Postgraduate students will be able to do the same.
The second section of the loan counseling focuses on avoiding delinquency and default. You’ll want to pay close attention to the second half of the counseling if you ended the first half on this note:
The section covers everything that might keep you from joining the 11.2 percent of borrowers with delinquent or defaulted loans. The counseling will cover options like:
- Deferment and forbearance
- Loan forgiveness
- Loan cancellation or discharge
- Resolving disputes with your servicer
- Loan consolidation
This portion of your counseling is less interactive than the first half. However, it is just as important. Be sure to take your time.
Why loan counseling is worth your time
If the DOE requires you to complete student loan counseling and you don’t get around to it, you won’t qualify for a PLUS Loan. That’s the biggest reason to finish it as soon as you’re asked.
Beyond that, the counseling is a great way to stay up to date on managing your student debt. The counseling is divided into two main sections — I completed each in about 15 or 20 minutes. You might be faster if you have all of your information handy.
All in all, student loan counseling is what you make of it. The more information you put into the Federal Student Aid’s tools, the better results you’ll receive. And the more time you spend learning about your loans, the more prepared you’ll be to repay them.
So although you might be required to do PLUS Credit Counseling, it can also be worth your while.
Interested in refinancing your Parent PLUS loans?Here are the top 6 lenders of 2018!
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for CommonBond.
5 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3|
|2.47% – 6.30%1|
|3.02% – 6.44%2|
|2.48% – 6.25%4|
|2.79% – 8.39%5|