How do credit reports affect Parent PLUS Loans?

The PLUS Loan is available to graduate students and parents of undergraduate students. Eligibility is based on the borrower’s credit history, not demonstrated financial need. As such, it is vital for prospective borrowers to review their credit reports before applying for a Parent PLUS Loan or Grad PLUS Loan.

Consumers may obtain a free copy of their credit reports from each of the three major credit bureaus once a year at Beware of copycat websites that charge a fee for additional services and, thus, aren’t really free.

PLUS Loan Credit Requirements

Eligibility for the PLUS Loan depends on a modest credit check that determines whether the borrower has an adverse credit history. Eligibility does not depend, however, on the borrower’s credit scores or debt-to-income ratios. Eligibility also does not depend on the borrower’s employment status; unemployed parents and graduate/professional students may still qualify for a PLUS Loan.

Serious Delinquency: A delinquency that is 90 or more days past due.

A borrower has an adverse credit history when the borrower currently has a serious delinquency on more than $2,085 in total debt. A serious delinquency is a delinquency that is 90 or more days past due.

A borrower is also considered to have an adverse credit history when any of the following issues occur within five years of the date of the borrower’s credit report:

Credit Issue Details
Default Determination The applicant had a debt in default within the past 5 years.
Bankruptcy Discharge The applicant had a Chapter 7, 11 or 12 bankruptcy discharge within the past 5 years.  Borrowers with a Chapter 13 bankruptcy discharges are not considered to have an adverse credit history. 
Foreclosure The foreclosure status has begun on the applicant’s mortgage, the applicant has tendered a deed in lieu of foreclosure or the applicant finalized a foreclosure within the past 5 years.
Repossession The applicant had a repossession, voluntary surrender or involuntary repossession within the last 5 years.
Tax Lien The applicant has an unsatisfied county, state or federal tax lien within the past 5 years.
Wage Garnishment The applicant’s wages have been garnished in the past 5 years and the wage garnishment has not been released and the debt has not been paid in full.
Write-Off The applicant had a write-off (charge-off) of any Title IV federal education loans in the past 5 years.

A borrower is also considered to have an adverse credit history when the borrower has more than $2,085 in total debt in collections or charged off in the two years preceding the date of the credit report.

Borrowers who do not have a credit history or who have a thin credit history are not considered to have an adverse credit history and, accordingly, are eligible for a PLUS Loan.

Next Steps When a Borrower has an Adverse Credit History

Curing an Adverse Credit History

If an applicant for a PLUS Loan has an adverse credit history, sometimes the applicant will be able to address the causes of the adverse credit history and reapply for a PLUS Loan after the changes to appear in the applicant’s credit report.

For example, if a 90-day delinquency is the only reason a borrower has an adverse credit history, bringing the account current by paying the delinquent amounts will cure the delinquency, enabling the applicant to qualify for a PLUS Loan.

Extenuating Circumstances

In some cases, an applicant for a PLUS Loan may be able to appeal a denial by documenting an error in the credit report or extenuating circumstances.

Extenuating circumstances may include documentation of any of the following circumstances:

  • Divorce decree which shows that the applicant is not responsible for repaying the debt
  • The adverse event occurred more than 5 years ago
  • The adverse event has been reversed or released
  • The account has been paid in full
  • A loan modification agreement has been finalized or a short sale has been approved and completed
  • The applicant made satisfactory payment arrangements and has made at least 6 voluntary, consecutive, on-time, full monthly payments

If a borrower qualified for a PLUS Loan last year and there have been no significant changes in the borrower’s credit report this year, the borrower should appeal the denial. The U.S. Department of Education has been using the extenuating circumstances review process for a more generalized appeal of PLUS Loan denials since September 2012.

Borrowers can appeal a PLUS Loan denial by calling 1-800-557-7394 or by selecting “Document Extenuating Circumstances” on

Reapply with an Endorser

If the applicant has an adverse credit history, he or she can reapply for a PLUS Loan with an endorser (cosigner) who does not have an adverse credit history. Note that endorsers are not eligible for an extenuating circumstances review.

If a parent has been denied a Parent PLUS Loan due to an adverse credit history, the student cannot serve as an endorser on the loan.

Cosigner Release: Some private student loan programs offer cosigner release, where the cosigner will be released from his or her obligation to repay the loan if the primary borrower satisfies credit underwriting criteria and has made the first 12, 24, 36 or 48 monthly payments on time and in full.

PLUS Loans do not have a cosigner release option. However, consolidating a PLUS Loan yields a new loan that pays off the PLUS Loan, effectively releasing the endorser from his or her obligation to repay the debt if the primary borrower defaults.

Receive More Direct Unsubsidized Loans

If a dependent student’s parent is denied a Parent PLUS Loan, the student becomes eligible for increased loan limits on the Direct Unsubsidized Loan. These are the same loan limits that are available to independent students. Contact the college’s financial aid office to determine and possibly obtain the higher loan limits.

In some cases, the student may be eligible for the increased Direct Unsubsidized Loan limits without a Parent PLUS Loan denial, if the college’s financial aid administrator determines that the parents are likely to be denied a Parent PLUS Loan or are unable to repay a PLUS Loan due to exceptional circumstances. Examples of exceptional circumstances include the parents receiving only public assistance or disability benefits, the parent is incarcerated, or the whereabouts of the parents are unknown.

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