Parents do not automatically qualify for the federal Parent Loan for Undergraduate Students (PLUS). The PLUS loan application process includes a credit check. According to the Federal Student Aid website, parents with an adverse credit history will not qualify for a loan. An adverse credit history is defined as follows:
Your credit history may be considered adverse if you are experiencing any of the following credit conditions:
- Bankruptcy discharge within the past five years.
- Voluntary surrender of personal property to avoid repossession within the last five years.
- Repossession of collateral within the last five years.
- Foreclosure proceedings started.
- Foreclosure within the last five years.
- Conveying your real property that is subject to a mortgage (by deed) to your lender to avoid foreclosure (deed in lieu of foreclosure).
- Accounts currently 90 days or more delinquent.
- Unpaid collection accounts.
- Charge-offs/write-offs of federal student loans.
- Wage garnishment within the last five years.
- Defaulting on a loan, even if the claim has been paid.
- Lease or contract terminated by default.
- County/state/federal tax lien within the past five years.
Parents who are denied a PLUS loan have the opportunity to obtain an endorser who doesn’t have an adverse credit history. Some parents may still receive the loan if they are able to document extenuating circumstances.
Students whose parents have been denied a PLUS loan are eligible to borrow additional money under the an unsubsidized direct loan. Freshman and sophomores can borrow $4,000 and juniors and seniors can borrow $5,000. Only one parent has to apply for a PLUS loan and be denied for the student to be eligible for the additional loans.
