How to Take Out Parent PLUS Loans (Even If You Have Poor Credit)

 March 30, 2021
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Finding student loans for parents with bad credit can be challenging, especially if you want to borrow from a private lender. However, even with a subpar credit history, you may be able to get a federal parent PLUS loan from the government.

The parent PLUS loan only requires that you don’t have “adverse credit,” and its definition for adverse credit isn’t as strict as that for a private lender. What’s more, there are a few workarounds if you don’t meet the parent PLUS loan credit score requirements.

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To learn how to solve a parent student loan credit dilemma, let’s look at the following topics:

Why getting student loans for parents with bad credit can be tough

With a fixed interest rate of 5.30% APR (for the 2020-2021 school year), parent PLUS loans can be a more affordable option than private loans. But unlike Direct Subsidized Loans and other forms of federal student loans, parent PLUS loans require a credit check.

If you have an adverse credit history, the government could deny your application. The Federal Student Aid office considers you to have an adverse credit history if you meet one of the following conditions:

  • You have debt with an outstanding balance greater than $2,085 that’s delinquent by 90 or more days.
  • During the past five years, you’ve been subject to a default determination; discharge of debt in bankruptcy; foreclosure; repossession; tax lien; wage garnishment; or write-off of federal student aid debt.

Student loans for parents with bad credit can be tough to come by, because if you have any of those items on your credit report, you’ll likely be unable to qualify for a parent PLUS loan.

4 steps to consider if your application was denied

If you can’t meet the parent PLUS loan credit score requirements, there are other ways to get the money you need. These four alternatives can help you find funding:

1. Apply with an endorser
2. Provide documentation of extenuating circumstances
3. Help your child apply for Direct Unsubsidized Loans
4. Look for other funding sources

1. Apply with an endorser

Even with poor credit, you might be able to qualify for a parent PLUS loan if you apply with an endorser. An endorser acts as a guarantor on the loan. The endorser, usually a relative or friend with good credit and a stable income, is responsible for the loan if you fall behind on your payments.

Having an endorser lowers the risk for the lender, so the government is more likely to issue you a loan than if you applied on your own.

2. Provide documentation of extenuating circumstances

In some cases, your adverse credit history can be the result of extenuating circumstances. If that’s the case and you’re now back on your feet, you might be able to get a parent PLUS loan by filing an appeal with the Department of Education.

If you apply and are denied based on your credit history, you’ll receive a notification on how to appeal the decision and submit documentation of extenuating circumstances. You’ll also be required to complete PLUS loan counseling.

3. Help your child apply for Direct Unsubsidized Loans

If you cannot qualify for parent PLUS loans because you have an adverse credit history, your child might be able to take out more Direct Unsubsidized Loans to fill the gap. Direct Unsubsidized Loans, where your child is responsible for all interest that accrues on the loan, have a fixed interest rate of 2.75% APR (for the 2020-2021 school year) and can be a cost-effective borrowing option.

Contact your child’s school to discuss your financial aid options and to see if additional Direct Unsubsidized Loans are available.

4. Look for other funding sources

If you have poor credit, taking out private student loans probably isn’t an option. You’re unlikely to be approved without a creditworthy cosigner. Even if you’re approved, you might get much higher interest rates than you would with federal loans.

Instead, another way to support your child is by helping them find and apply for grants and scholarships. Your child can combine multiple scholarships and grants to reduce their college costs and limit their need for student loans.

Use our guide to state financial aid grants to find money for your child’s education.

Your child can also use the tips in our all-inclusive guide to college scholarships for high school seniors to find financial aid.

More tips to finding student loans for parents with bad credit

If you have poor credit, it might be impossible to get a parent PLUS loan on your own. But there are tools to help you build credit if you’re having trouble. In the interim, applying with an endorser or submitting documentation of extenuating circumstances might help you qualify for a federal loan.

If your application for a PLUS loan is still denied, don’t be discouraged. You can still help your child achieve their education goals. For more ideas, here’s how you can help your child pay for college without spending a cent.

Rebecca Safier also contributed to this article.

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