PLUS Loan Application Denied - What Do I Do Now?

PLUS loans are available for students and parents in order to meet certain expenses associated with financing college education. The PLUS loan program is a federal backed program offered through the U.S. Department of Education. It provides funds, without limit, through either the Federal Family Educational Loan (FFEL) or William D. Ford Federal Direct Loan (Direct) Program.

PLUS loans are designed to meet the difference between the cost of education and the amount of aid received, including a parent’s expected financial contribution (EFC). For example, if the cost of education is $10,000 and the amount of aid and EFC is $5,000, the student and their parent’s need $5,000.

Requirements for a PLUS Loan

In order to participate in either the FFEL or Direct PLUS loan programs (a borrower may not apply for both in a given semester) a student must be an undergraduate student attending an eligible, accredited college or university at least 1/2 time. The parent of the student who applies for the loan must have a good credit score in order to qualify.

If a student’s parent does not have the credit rating sufficient to qualify for the loan the application will be denied. This leaves the student and their parents with a funding gap that has to be met in order to pay their education costs. A student will need to look to other sources in the case of a loan denial.

Qualified Co-Signer

Before seeking other resources, a student borrower’s parents may seek a qualified co-signer for the loan. This allows the application to be approved and access to the needed funding. The family member, friend or acquaintance who co-signs the loan puts themselves into the position of loan guarantor. Should the student fail to complete school or is otherwise not in a position to pay the loan back, it becomes the responsibility of the co-signer.

Second-Chance Loans

There are second-chance or sub-prime lenders who provide loans to families with bad credit. These loans work in much the same way that other forms of second-chance loans do. They are offered at high interest rates to protect the lender against the risk of loan default or non-payment. The loans also are typically required to start to be paid back within 30 to 60 days after the student begins school.

Home Equity Loans

A parent may look to take a home equity loan or borrow against any line of credit that they have in order to meet their need. These loans are difficult to acquire for individuals who have been denied loans in the past but again, working with a sub-prime lender may help secure the financing. The trade-off of course is that the loan will be at a high interest rate as compared to what would have been given on the PLUS loan or a comparable consumer loan.

Contact College Funding Expert

A parent should contact a financial aid counselor or an individual who specializes in college funding. This person can use their expertise in order to find alternative resources that may be available.


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