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If you have poor credit, you’re not alone. Sixteen percent of Americans have a “poor” credit score, ranging between 300 and 579, according to Experian, one of the three major credit bureaus. If you’re one of the millions of people in this category and have children in college, you may not think you’re eligible for financial aid because of your credit.
However, it can still be beneficial to apply for parent PLUS loans—even if you think your credit isn’t good enough—to ensure your child gets all the college aid they’re entitled to.
Can I Get a Parent PLUS Loan With Bad Credit?
Federal parent PLUS loans are increasingly common. As of 2022, 3.6 million people have outstanding parent PLUS loans, up from 3.1 million in 2014. Despite their popularity, it’s important to know that PLUS loans work differently from other federal student loans. While federal loans for undergraduate students don’t require credit checks, PLUS loans do.
Your application for a parent PLUS loan will be denied if you have an adverse credit history. However, you may still qualify for federal student loans even if you have a credit score on the lower end of the scale.
When it comes to federal financial aid, the term “adverse credit history” has a specific definition. Rather than referring to your credit score, an adverse credit history means you have one of the following items on your credit reports:
- You have one or more debt accounts with an outstanding balance greater than $2,085 that are 90 days or more delinquent, have been placed in collections or charged off during the past two years
- During the past five years, you have been the subject of one or more of the following:
- Loan default
- Discharge of debt in bankruptcy
- Foreclosure or repossession
- Tax lien
- Wage garnishment
- Write-off of federal student aid debt
Adverse credit history is different from having bad credit or no credit. Unlike private student loan lenders, which typically have minimum credit score requirements, you can qualify for federal aid with less-than-perfect credit. For example, if you have no credit history or poor credit due to a high credit utilization ratio or multiple new credit inquiries, you can likely still get a parent PLUS loan.
How to Get a Parent PLUS If You Don’t Qualify
Although the credit requirements for parent PLUS loans are less rigorous than those of private student loan lenders, your application may be denied because of your adverse credit history. However, there might be steps you can take to qualify for a PLUS loan.
Get an Endorser
One way to get a parent PLUS loan is to add an endorser to your application. An endorser functions like a loan co-signer; that is, someone with a strong credit history who agrees to repay the loan if you can’t make your payments.
An endorser can be a family member or close friend but cannot be the child on whose behalf you’re borrowing.
File an Appeal
If there are extenuating circumstances related to your adverse credit history, you can file an appeal and provide documentation to potentially qualify for a PLUS loan.
However, the acceptable scenarios for appeals are limited. In general, extenuating circumstances refer to situations where you are no longer legally responsible for past debts, an error was made in your credit report or an overdue debt has been repaid. Examples of extenuating circumstances and qualifying documentation include:
- Delinquent account or account in collections: A divorce decree that shows the borrower is not responsible for the account.
- Repossessed property: Documentation from the lender that shows the debt was paid in full.
- Foreclosure process started: Finalized, signed and notarized loan modification agreement and proof of payment.
The Department of Education will review your documentation and decide whether to approve your appeal. If you meet the requirements, you can qualify for a loan, but you’ll have to complete PLUS credit counseling.
You can start the appeal process for PLUS loans online.
Ask Another Parent to Apply
If you have an adverse credit history, you can ask another parent to apply for a PLUS loan instead. To qualify for a PLUS loan, you must be the biological or adoptive parent of the student. In some cases, stepparents are also eligible.
For example, if you’re divorced and your PLUS loan application is denied, you can ask your former spouse to apply for a PLUS loan for your child.
Apply for a Parent PLUS Loan, Even If You’ll Be Denied
If you know you have an adverse credit history, applying for a parent PLUS loan is likely still worth it.
If your application is denied, your child may be eligible for additional federal Direct loans, allowing them to take out low-interest loans to cover the cost of their education. For example, a first-year dependent student would typically be eligible for up to $5,500 in federal Direct loans. However, if the student’s parents are ineligible for PLUS loans, the student can borrow up to $9,500.
Depending on your child’s college, they may also be eligible for additional aid, such as institutional grants or loan programs for students with financial needs. After receiving a PLUS application denial, contact the school’s financial aid office to discuss available options.
Even if you don’t think you’ll qualify for parent PLUS loans, consider applying for them every year so your child is considered for the maximum amount of financial aid available.
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