An offer of a Federal Direct Parent PLUS Loan on the SU award letter is an indication of eligibility to borrow, not loan approval. At the same time, because the Parent PLUS Loan requires credit approval, not all PLUS offers can turn into secured loans.
Sometimes, unfortunately, a parent borrower’s credit history does not produce an approval and therefore limits access to the Parent PLUS Loan. What are a parent’s options when a PLUS loan is not approved for credit reasons? See the options below:
Utilize Another Parent Borrower
The “parent” in Federal Direct Parent PLUS Loan applies to biological or adoptive parents or a step-parent listed on the FAFSA. Therefore, some students can elect to have another PLUS applicant.
Any other qualifying parent or step-parent willing to apply for the PLUS Loan can complete a PLUS loan request, and the new borrowing parent will have a credit check done to determine their eligibility. This new borrowing parent will then have to complete a master promissory note (MPN) on the student loan website.
Pursue Additional Student Unsubsidized Stafford Loan
In cases when a parent’s credit is denied or when an eligible endorser is not available, the student is eligible for additional Unsubsidized Stafford Loan funds. This additional student borrowing will likely be less than the PLUS but can assist the student in meeting educational costs.
Freshmen and sophomores are eligible for an increase of up to $4,000 based on cost of education. Juniors and seniors can get up to an additional $5,000. This increase is not available if any parent passes the credit check or an endorser is approved through the PLUS credit check process.
Requests for the additional unsubsidized loan should be made to the Financial Aid Office.
Utilize an Endorser
Similar to a co-signer, an endorser is someone who will pass the credit check and who agrees to repay the PLUS Loan if the borrower is unable to do so. Almost anyone can serve as an endorser. However, the student cannot serve as an endorser for their parent.
If you choose to obtain an endorser, the endorser should complete the endorser addendum at studentloans.gov. The endorser will need the Loan Reference Number (if a Direct PLUS Loan Request was completed) or Loan Identification Number to connect the endorsement to the denied PLUS Loan. Completing the endorsement online also requires a Federal Student Aid personal identification number (FSA PIN).
The Loan Reference number can be found in the confirmation email received in the denial notice, or by logging into studentloans.gov and selecting “Direct PLUS Loan Requests.”
If the endorser must obtain an FSA ID if they do not already have one.
Master promissory notes (MPNs) are used for PLUS Loans and allow for multiple year borrowing under the same terms. However, when an endorser is used, the terms of the MPN used for that loan is specific only to that loan. Therefore, a borrower who has previously received a PLUS Loan without an endorser will need to complete a unique MPN for the endorsed loan. Also, any additional PLUS borrowing will require a new MPN and endorser addendum (though the same endorser can be used).
Inform the Financial Aid Office whenever the borrower is seeking or using an endorser so that the loan is not canceled during the endorser application process.
NOTE: The endorser addendum, PLUS Loan, and award offer amounts all must match.
Appeal a credit decision
The Department of Education allows borrowers whose credit was denied the opportunity to document either of the following situations.
Information showing that credit reporting used in the credit denial is incorrect and/or has been corrected.
Extenuating circumstances exist relating to the adverse credit history of the primary PLUS borrower.
Borrowers make a credit appeal through one of these means.
Log in to studentloans.gov and select “Document Extenuating Circumstances” on the left navigation bar. Follow the directions and a representative from the Department of Education’s Applicant Services will contact the borrower with further instructions.
Contact Applicant Services at 1-800-557-7394 between 8a to 8p, Monday through Friday.
Whenever a borrower is appealing credit, please alert Student Financial Aid so the PLUS Loan is not canceled during the appeal process.