For parents who want to help their children pay for school, federal Parent PLUS Loans are one of the best options available. In fact, the office of Federal Student Aid reported that over 3.5 million borrowers had Parent PLUS Loans in the fourth quarter of 2017.
However, not all parents can qualify for a Parent PLUS Loan on their own. Unlike some other forms of federal student loans, PLUS Loans require a credit check. Poor credit can make it impossible to take out PLUS Loans yourself.
How your credit history affects your Parent PLUS Loan application
Federal loans are a smart first choice when it comes to borrowing money for your child’s education. They tend to have lower interest rates, more flexible repayment terms, and more benefits than private student loans. With a fixed interest rate of 7.00%, Parent PLUS Loans can be a more affordable option than private loans.
To qualify for a Parent PLUS Loan, you must be the adoptive or biological parent of a student. In some cases, stepparents can also qualify. Your child must be a dependent undergrad and enrolled at least half time in school.
Unlike other forms of federal student loans, such as Direct Subsidized Loans, Parent PLUS Loans require a credit check. If you have an adverse credit history, the government could deny your application.
The office of Federal Student Aid considers you to have an adverse credit history if you meet one of the following:
- 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.
If you have any of those items on your credit report, you’ll likely be unable to get a Parent PLUS Loan.
4 alternatives to consider if your application was denied
If you can’t take out a Parent PLUS Loan for your child’s education, there are other ways to get the money you need. These four alternatives can help you find funding.
1. Apply with an endorser
Even with poor credit, you might be able to qualify for a Parent PLUS Loan. You can apply for the loan 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 an interest rate of 4.45% 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 either. You’re unlikely to be approved. Even if you’re approved, you’ll likely pay 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.
Helping your child pay for school
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 help your child complete their education. For more ideas, here’s how you can help your child pay for college without spending a cent.
Need a student loan?Here are our top student loan lenders of 2019!
|1 Important Disclosures for Ascent.
Before taking out private student loans, you should explore and compare all financial aid alternatives, including grants, scholarships, and federal student loans and consider your future monthly payments and income. Applying with a cosigner may improve your chance of getting approved and could help you qualify for a lower interest rate. Ascent Student Loans may be funded by Richland State Bank (RSB). Ascent Student Loan products are subject to credit qualification, completion of a loan application, verification of application information and certification of loan amount by a participating school. Loan products may not be available in certain jurisdictions, and certain restrictions, limitations; and terms and conditions may apply. Ascent is a federally registered trademark of Turnstile Capital Management (TCM) and may be used by RSB under limited license. Richland State Bank is a federally registered service mark of Richland State Bank.
* Application times vary depending on the applicants ability to supply the necessary information for submission.
2 Important Disclosures for CollegeAve.
College Ave Student Loans products are made available through either Firstrust Bank, member FDIC or M.Y. Safra Bank, FSB, member FDIC. All loans are subject to individual approval and adherence to underwriting guidelines. Program restrictions, other terms, and conditions apply.
Information advertised valid as of 2/1/2019. Variable interest rates may increase after consummation.
3 Important Disclosures for Discover.
* The Sallie Mae partner referenced is not the creditor for these loans and is compensated by Sallie Mae for the referral of Smart Option Student Loan customers.
4 = Sallie Mae Disclaimer: Click here for important information. Terms, conditions and limitations apply.
5 Important Disclosures for SunTrust.
Before applying for a private student loan, SunTrust recommends comparing all financial aid alternatives including grants, scholarships, and both federal and private student loans. To view and compare the available features of SunTrust private student loans, visit https://www.suntrust.com/loans/student-loans/private.
Certain restrictions and limitations may apply. SunTrust Bank reserves the right to change or discontinue this loan program without notice. Availability of all loan programs is subject to approval under the SunTrust credit policy and other criteria and may not be available in certain jurisdictions.
SunTrust Bank, Member FDIC. ©2019 SunTrust Banks, Inc. SUNTRUST, the SunTrust logo and Custom Choice Loan are trademarks of SunTrust Banks, Inc. All rights reserved.
6 Important Disclosures for LendKey.
Additional terms and conditions apply. For more details see LendKey
7 Important Disclosures for CommonBond.
A government loan is made according to rules set by the U.S. Department of Education. Government loans have fixed interest rates, meaning that the interest rate on a government loan will never go up or down.
Government loans also permit borrowers in financial trouble to use certain options, such as income-based repayment, which may help some borrowers. Depending on the type of loan that you have, the government may discharge your loan if you die or become permanently disabled.
Depending on what type of government loan that you have, you may be eligible for loan forgiveness in exchange for performing certain types of public service. If you are an active-duty service member and you obtained your government loan before you were called to active duty, you are entitled to interest rate and repayment benefits for your loan.
A private student loan is not a government loan and is not regulated by the Department of Education. A private student loan is instead regulated like other consumer loans under both state and federal law and by the terms of the promissory note with your lender.
If your private student loan has a fixed interest rate, then that rate will never go up or down. If your private student loan has a variable interest rate, then that rate will vary depending on an index rate disclosed in your application. If the interest rate on the new private student loan is less than the interest rate on your government loans, your payments will be less if you refinance.
If you don’t pay a private student loan as agreed, the lender can refer your loan to a collection agency or sue you for the unpaid amount.
Remember also that like government loans, most private loans cannot be discharged if you file bankruptcy unless you can demonstrate that repayment of the loan would cause you an undue hardship. In most bankruptcy courts, proving undue hardship is very difficult for most borrowers.
8 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|4.23% – 13.23%1||Undergraduate and Graduate|
|4.20% – 11.44%2||Undergraduate, Graduate, and Parents|
|4.84% – 13.49%3||Undergraduate and Graduate|
|4.50% – 10.11%*,4||Undergraduate and Graduate|
|4.25% – 13.25%5||Undergraduate and Graduate|
|5.85% – 6.99%6||Undergraduate and Graduate|
|3.95% – 9.81%7||Undergraduate, Graduate, and Parents|
|4.45% – 12.42%8||Undergraduate, Graduate, and Parents|