If you're a parent or graduate student seeking a Direct PLUS Loan, one of the requirements to qualify is that you must not have an adverse credit history. If your application is denied because of an adverse credit history, don't give up. You still have options.
Unless you have current collections it's pretty easy to get approved for a parent loan, your credit score is fine. If you're declined you can appeal and prove you've paid off anything.
No minimum credit score is needed to get a parent PLUS loan. Federal loans aren't like private parent student loans, which use your credit score to determine whether you qualify and what interest rate you'll receive. But parent PLUS loans do have a credit check, and you won't qualify if you have adverse credit history.
How to Use the Double Consolidation Loophole: The key to using the double consolidation loophole is to consolidate each of your Parent PLUS Loans twice. In this scenario, a borrower can have as few as two Parent PLUS Loans.
The $100,000 Loophole.
With a larger below-market loan, the $100,000 loophole can save you from unwanted tax results. To qualify for this loophole, all outstanding loans between you and the borrower must aggregate to $100,000 or less.
Parent PLUS Loan borrowers can have their debt forgiven after 10 years of working full-time for the government, nonprofit, or other qualifying employers. For the past year, retired public servants could submit an application to get retroactive credit towards the Public Service Loan Forgiveness Program.
Eligibility for Federal Parent PLUS Loans
Dependent student must be making satisfactory academic progress, such as maintaining at least a 2.0 GPA on a 4.0 scale in college. Parent and dependent student aren't in default on a federal student loan or grant overpayment.
Unlike all other federal student loans, there are no explicit borrowing limits for parent PLUS loans. Parents may borrow up to the full cost of attendance, which is determined by the institution, not the government, and includes books, travel and living expenses. There are no ability-to-repay standards for PLUS loans.
What Are Some Reasons to Avoid PLUS Loans? First, PLUS loans have no automatic grace period. Then there's the fact they aren't eligible for most IDR plans. Then, borrowing too much is easy to do, and finally, they're nearly impossible to get out of, even in bankruptcy.
Does my debt-to-income ratio, credit score, or employment status count against me when I apply for a PLUS loan? These factors aren't taken into account when credit history is reviewed. A lack of credit is not considered adverse credit. write-off of federal student aid debt.
Completing the Online Application: (Note: The online PLUS application for 2024-2025 should not be submitted before June 1, 2024.) You may apply for a Direct PLUS Loan at www.studentaid.gov.
To be eligible for a Direct PLUS Loan for parents, you must be a biological or adoptive parent (or in some cases a stepparent), not have an adverse credit history, and meet the general eligibility requirements for federal student aid (which the child must meet as well).
What happens to my parent's PLUS loan if my parent dies or if I die? Your parent's PLUS loan will be discharged if your parent dies or if you (the student on whose behalf your parent obtained the loan) die.
Requirements for parents:
You must be the biological or adoptive parent of a dependent undergraduate student enrolled at least half-time. You must be a U.S. citizen or eligible non-citizen. You generally must meet minimal credit standards, and the student must meet general eligibility requirements for financial aid.
Based on the information from Federal Student Aid, as of 2022, the average Parent PLUS Loan debt is $29,528. Although that might not sound like a huge amount, it depends on the parent's income.
However, you don't need to meet a minimum credit score to qualify. Instead, the check looks for “adverse credit,” such as bankruptcies, repossessions, wage garnishment, or tax liens in the past five years. But even if you do have adverse credit, you may still be able to get a parent PLUS loan.
How long does it take to process a Federal Direct Parent PLUS Loan? Depending on the time of year, processing can take 2-4 weeks.
Parent PLUS loans can potentially be forgiven after 10 years under specific conditions, such as through the Public Service Loan Forgiveness (PSLF) program after consolidation into a direct consolidation loan. Parent borrowers must enroll in the Income-Contingent Repayment (ICR) plan to qualify for PSLF.
You must repay the loan in 10 years. Extended Repayment Plan—Under this plan, you can choose to make fixed or graduated monthly payments for up to 25 years.
Direct PLUS Loans for Parents
If there is money left over, the school will pay it to you. In some cases, with your permission, the school may give the leftover money to your child.
Your parent PLUS loan may be discharged if you (not the child) become totally and permanently disabled, die, or (in some cases) file for bankruptcy. Your parent PLUS loan also may be discharged if the student for whom you borrowed dies.