If you're a parent who has been denied a Parent PLUS Loan, you're not alone. In recent years, the approval rate for Parent PLUS Loans has been declining, and many parents are finding themselves in the same situation. This can be a stressful and confusing time, but there are steps you can take to move forward.
In this article, we'll provide you with information about the Parent PLUS Loan program, the reasons why you might be denied a loan, and what you can do if your loan is denied. We'll also provide tips on how to improve your chances of getting approved for a Parent PLUS Loan in the future.
Before we dive into the details, let's take a closer look at the Parent PLUS Loan program.
parent plus loan denied
If you're facing this situation, here are 10 important points to keep in mind:
- Not alone: Many parents are denied Parent PLUS Loans.
- Reasons for denial: Bad credit, high debt, or adverse credit history.
- Appeal denial: Contact lender and explain extenuating circumstances.
- Co-signer: Find someone with good credit to co-sign the loan.
- Alternative loans: Explore private student loans or home equity loans.
- Federal aid: Apply for federal student aid, such as grants and scholarships.
- Repayment options: Consider income-driven repayment plans.
- Deferment or forbearance: Ask lender about deferment or forbearance options.
- Improve credit: Work on improving your credit score over time.
- Save for college: Start saving for college early to reduce need for loans.
Remember, you're not alone in this situation. There are resources available to help you navigate the Parent PLUS Loan process and find the best options for financing your child's education.
Not alone: Many parents are denied Parent PLUS Loans.
You're not alone if you've been denied a Parent PLUS Loan. In recent years, the approval rate for these loans has been declining. In the 2021-2022 academic year, only 73% of Parent PLUS Loan applications were approved, down from 90% in 2010-2011. This means that a significant number of parents are being denied the opportunity to borrow money to help their children pay for college.
There are a number of reasons why Parent PLUS Loans are being denied more frequently. One reason is that the U.S. Department of Education has been cracking down on fraud and abuse in the student loan program. As a result, lenders are taking a closer look at Parent PLUS Loan applications and are more likely to deny loans to borrowers who have poor credit or a high debt-to-income ratio.
Another reason for the decline in approval rates is that the cost of college has been rising steadily for many years. This means that parents are often borrowing more money than ever before to help their children pay for school. As a result, lenders are more concerned about the ability of parents to repay their loans.
If you've been denied a Parent PLUS Loan, it's important to remember that you're not alone. There are a number of things you can do to move forward, such as appealing the denial, finding a co-signer, or exploring alternative loan options. You can also contact the U.S. Department of Education's Federal Student Aid office for assistance.
Despite the challenges, many parents are still able to get approved for Parent PLUS Loans. By understanding the reasons for the decline in approval rates and taking steps to improve your chances of getting approved, you can increase your likelihood of securing a Parent PLUS Loan to help your child pay for college.
Reasons for denial: Bad credit, high debt, or adverse credit history.
There are a number of reasons why your Parent PLUS Loan application may be denied. Some of the most common reasons include:
- Bad credit: Lenders will look at your credit score and credit history when evaluating your Parent PLUS Loan application. If you have a low credit score or a history of missed or late payments, your application is more likely to be denied.
- High debt: Lenders will also consider your debt-to-income ratio when evaluating your Parent PLUS Loan application. This ratio compares your monthly debt payments to your monthly income. If you have a high debt-to-income ratio, your application is more likely to be denied.
- Adverse credit history: Lenders will also look for any adverse credit history, such as bankruptcies, foreclosures, or wage garnishments. If you have any of these items on your credit report, your application is more likely to be denied.
- Other factors: In addition to your credit history and debt-to-income ratio, lenders may also consider other factors when evaluating your Parent PLUS Loan application. These factors may include your employment history, your income, and your assets.
If your Parent PLUS Loan application is denied, you can appeal the decision. You can also try to improve your chances of getting approved by cosigning the loan with someone who has good credit or by exploring alternative loan options.
Appeal denial: Contact lender and explain extenuating circumstances.
If your Parent PLUS Loan application is denied, you have the right to appeal the decision. To do this, you need to contact the lender and explain any extenuating circumstances that may have contributed to your denial.
Extenuating circumstances are events or situations that were beyond your control and that may have negatively impacted your credit score or debt-to-income ratio. Some examples of extenuating circumstances include:
- Medical emergencies
- Job loss
- Natural disasters
- Divorce
- Death of a family member
When you appeal your denial, you need to provide documentation to support your claim. This documentation may include medical records, pay stubs, or other financial documents.
The lender will review your appeal and make a decision. If your appeal is approved, the lender may approve your Parent PLUS Loan application or offer you a different loan option.
Here are some tips for appealing your Parent PLUS Loan denial:
- Contact the lender as soon as possible after you receive your denial letter.
- Be polite and respectful when speaking to the lender's customer service representatives.
- Explain your extenuating circumstances in detail.
- Provide documentation to support your claim.
- Be patient. It may take some time for the lender to review your appeal.
If your appeal is denied, you can still explore other options for financing your child's education. You may be able to get a private student loan or a home equity loan. You can also apply for federal student aid, such as grants and scholarships.
Co-signer: Find someone with good credit to co-sign the loan.
If you're having trouble getting approved for a Parent PLUS Loan on your own, you may want to consider finding someone with good credit to co-sign the loan. A co-signer is someone who agrees to repay the loan if you're unable to do so.
Co-signing a loan can be a big responsibility, so it's important to choose someone who is financially stable and has a good credit history. You should also make sure that you understand the terms of the loan before you agree to co-sign.
If you're able to find a co-signer, it can significantly improve your chances of getting approved for a Parent PLUS Loan. Lenders are more likely to approve loans to borrowers who have a co-signer with good credit.
Here are some tips for finding a co-signer for a Parent PLUS Loan:
- Ask a close friend or family member.
- Consider asking a colleague or business associate.
- You can also find a co-signer online through a service like Cosigner.com.
Once you've found a co-signer, you'll need to complete a co-signer application. The lender will then review the application and make a decision on your loan.
If you're approved for a Parent PLUS Loan with a co-signer, it's important to make your payments on time and in full. If you fail to make your payments, your co-signer will be responsible for repaying the loan.
Alternative loans: Explore private student loans or home equity loans.
If you're unable to get approved for a Parent PLUS Loan or if you're not comfortable with the terms of the loan, you may want to consider exploring alternative loan options.
- Private student loans: Private student loans are loans that are made by banks and other private lenders. They are not backed by the federal government. Private student loans can be used to pay for any qualified educational expenses, including tuition, fees, room and board, and books.
The interest rates on private student loans are typically higher than the interest rates on federal student loans. However, private student loans may be easier to get approved for than federal student loans, especially if you have bad credit or a high debt-to-income ratio.
- Home equity loans: Home equity loans are loans that are secured by your home equity. Home equity loans can be used for any purpose, including paying for college.
The interest rates on home equity loans are typically lower than the interest rates on private student loans. However, home equity loans can be risky. If you fail to make your payments, you could lose your home.
- Other options: There are a number of other options available to help you pay for college, including scholarships, grants, and work-study. You can also explore payment plans with your child's school.
It's important to carefully consider all of your options before you decide how to pay for college. Talk to your child, your financial advisor, and your lender to find the best option for your family.
Federal aid: Apply for federal student aid, such as grants and scholarships.
If you're struggling to pay for college, you should definitely apply for federal student aid. Federal student aid is money that is provided by the U.S. government to help students pay for college. Federal student aid comes in the form of grants, scholarships, and loans.
- Grants: Grants are free money that does not have to be repaid. There are a number of different federal grants available, including the Pell Grant, the Federal Supplemental Educational Opportunity Grant (FSEOG), and the TEACH Grant.
To be eligible for a federal grant, you must demonstrate financial need. You can apply for a federal grant by completing the Free Application for Federal Student Aid (FAFSA).
- Scholarships: Scholarships are also free money that does not have to be repaid. Scholarships are typically awarded based on academic merit, athletic ability, or other criteria.
There are a number of different federal scholarships available, including the National Merit Scholarship, the Gates Millennium Scholarship, and the Hispanic Scholarship Fund.
- Loans: Federal student loans are loans that are made by the U.S. government. Federal student loans have lower interest rates than private student loans.
To be eligible for a federal student loan, you must demonstrate financial need. You can apply for a federal student loan by completing the FAFSA.
- Work-study: Work-study is a program that allows students to work part-time to earn money to help pay for college.
To be eligible for work-study, you must demonstrate financial need. You can apply for work-study by completing the FAFSA.
Federal student aid can be a great way to help pay for college. If you're eligible, you should definitely apply for federal student aid.
Repayment options: Consider income-driven repayment plans.
If you're struggling to repay your Parent PLUS Loan, you may be able to qualify for an income-driven repayment plan. Income-driven repayment plans are repayment plans that base your monthly payments on your income and family size.
- Income-Based Repayment (IBR): Under IBR, your monthly payments will be capped at 10% of your discretionary income. Discretionary income is the amount of money you have left over after paying for basic living expenses, such as food, housing, and transportation.
IBR is available to all Parent PLUS Loan borrowers.
- Pay As You Earn (PAYE): Under PAYE, your monthly payments will be capped at 10% of your discretionary income. However, PAYE has stricter eligibility requirements than IBR.
To be eligible for PAYE, you must have taken out your Parent PLUS Loan on or after October 1, 2007, and you must have a partial financial hardship.
- Revised Pay As You Earn (REPAYE): REPAYE is similar to PAYE, but it has more flexible eligibility requirements.
To be eligible for REPAYE, you must have taken out your Parent PLUS Loan on or after October 1, 2017. You do not need to demonstrate a partial financial hardship.
- Income-Contingent Repayment (ICR): Under ICR, your monthly payments will be capped at 20% of your discretionary income. However, ICR has a longer repayment period than the other income-driven repayment plans.
ICR is available to all Parent PLUS Loan borrowers.
If you're interested in applying for an income-driven repayment plan, you can contact your loan servicer.
Deferment or forbearance: Ask lender about deferment or forbearance options.
If you're struggling to make your Parent PLUS Loan payments, you may be able to qualify for deferment or forbearance. Deferment and forbearance are temporary programs that allow you to pause or reduce your loan payments.
- Deferment: Deferment allows you to temporarily postpone your loan payments. You can qualify for deferment if you are:
- Enrolled at least half-time in an eligible school
- Unemployed or experiencing economic hardship
- Serving in the military
- Participating in a rehabilitation program for disabled borrowers
- Forbearance: Forbearance allows you to temporarily reduce or pause your loan payments. You can qualify for forbearance if you are experiencing a temporary financial hardship, such as a job loss or a medical emergency.
Unlike deferment, interest continues to accrue on your loan during forbearance.
If you're interested in applying for deferment or forbearance, you can contact your loan servicer.
Improve credit: Work on improving your credit score over time.
If you've been denied a Parent PLUS Loan due to bad credit, you can take steps to improve your credit score over time. Here are a few tips:
- Pay your bills on time, every time: Payment history is one of the most important factors in your credit score. Make sure to pay all of your bills, including your rent or mortgage, your credit card bills, and your student loans, on time and in full each month.
- Keep your credit utilization low: Credit utilization is the amount of credit you're using compared to your total credit limit. Try to keep your credit utilization below 30%.
- Reduce your debt: If you have a lot of debt, it can hurt your credit score. Try to reduce your debt by making extra payments on your loans or by getting a balance transfer credit card with a lower interest rate.
- Get a credit builder loan: A credit builder loan is a type of loan that is designed to help you build your credit. You make monthly payments on the loan, and the lender reports your payments to the credit bureaus. After you've repaid the loan, you'll have a positive credit history.
- Become an authorized user on someone else's credit card: If you have a friend or family member with good credit, you can ask them to add you as an authorized user on their credit card. This will allow you to build your credit history by piggybacking on their good credit.
It takes time to build good credit, so don't get discouraged if you don't see results immediately. Just keep following these tips and you'll eventually see your credit score improve.
Once you've improved your credit score, you may be able to qualify for a Parent PLUS Loan or other types of loans with better interest rates.
Save for college: Start saving for college early to reduce need for loans.
One of the best ways to avoid having to take out Parent PLUS Loans is to start saving for college early. The earlier you start saving, the more time your money has to grow.
- Open a 529 plan: A 529 plan is a tax-advantaged savings plan that is designed for education expenses. Earnings in a 529 plan grow tax-free, and withdrawals are tax-free as long as they are used for qualified education expenses.
- Contribute to a Coverdell ESA: A Coverdell ESA is another tax-advantaged savings plan that can be used for education expenses. Contributions to a Coverdell ESA are not tax-deductible, but earnings grow tax-free and withdrawals are tax-free as long as they are used for qualified education expenses.
- Save in a regular savings account: If you don't want to open a 529 plan or a Coverdell ESA, you can simply save for college in a regular savings account. Just make sure to choose a savings account with a high interest rate.
- Make saving for college a priority: Set a savings goal and stick to it. Even if you can only save a small amount each month, it will add up over time.
By starting to save for college early, you can reduce the amount of money you need to borrow in loans. This can save you a lot of money in interest and give you more financial flexibility in the future.
FAQ
If you're a parent who is considering taking out a Parent PLUS Loan, you may have some questions. Here are answers to some of the most frequently asked questions:
Question 1: What is a Parent PLUS Loan?
Answer 1: A Parent PLUS Loan is a federal loan that allows parents to borrow money to help pay for their child's college education. Parent PLUS Loans are available to parents of dependent undergraduate students who are enrolled at least half-time in a degree program at an eligible school.
Question 2: How much can I borrow with a Parent PLUS Loan?
Answer 2: The maximum amount you can borrow with a Parent PLUS Loan is the cost of attendance at your child's school, minus any other financial aid your child receives. The cost of attendance includes tuition and fees, room and board, books and supplies, and other expenses.
Question 3: What are the interest rates for Parent PLUS Loans?
Answer 3: The interest rates for Parent PLUS Loans are fixed and are set each year by the U.S. Department of Education. The current interest rate for Parent PLUS Loans is 7.54%.
Question 4: How do I apply for a Parent PLUS Loan?
Answer 4: You can apply for a Parent PLUS Loan online at the Federal Student Aid website. You will need to provide information about your income, assets, and credit history. You will also need to provide your child's Social Security number and school information.
Question 5: What are the repayment options for Parent PLUS Loans?
Answer 5: There are a number of repayment options available for Parent PLUS Loans. You can choose to repay your loan over a period of 10 to 25 years. You can also choose to make income-driven payments, which are based on your income and family size.
Question 6: What happens if I can't repay my Parent PLUS Loan?
Answer 6: If you can't repay your Parent PLUS Loan, you may be able to defer or forbear your payments. You may also be able to apply for loan forgiveness.
If you have any other questions about Parent PLUS Loans, you can contact your loan servicer or the U.S. Department of Education.
Now that you know more about Parent PLUS Loans, you can make an informed decision about whether or not to borrow money to help pay for your child's college education.
Tips
Here are a few tips for parents who are considering taking out a Parent PLUS Loan:
Tip 1: Apply early.
The Parent PLUS Loan application process can take some time, so it's important to apply early. The application deadline for the Parent PLUS Loan is June 30th for the following school year. However, it's best to apply as early as possible to avoid any delays in getting your loan approved.
Tip 2: Shop around for the best interest rate.
Not all lenders offer the same interest rates on Parent PLUS Loans. It's important to shop around and compare interest rates from different lenders before you apply for a loan. You can use a loan comparison website to find the best interest rates.
Tip 3: Consider a co-signer.
If you have bad credit or a high debt-to-income ratio, you may need to find a co-signer for your Parent PLUS Loan. A co-signer is someone who agrees to repay the loan if you're unable to do so. Having a co-signer with good credit can help you get approved for a loan and may also help you get a lower interest rate.
Tip 4: Make a budget and stick to it.
Before you take out a Parent PLUS Loan, it's important to make a budget and stick to it. This will help you ensure that you can afford to repay the loan. Your budget should include all of your monthly expenses, including your loan payments.
By following these tips, you can increase your chances of getting approved for a Parent PLUS Loan and getting the best possible interest rate.
Taking out a Parent PLUS Loan is a big decision. It's important to weigh the pros and cons carefully before you apply for a loan. If you're not sure whether or not a Parent PLUS Loan is right for you, talk to your financial advisor or the U.S. Department of Education.
Conclusion
Taking out a Parent PLUS Loan is a big decision. It's important to weigh the pros and cons carefully before you apply for a loan. If you decide that a Parent PLUS Loan is right for you, there are a few things you can do to increase your chances of getting approved and getting the best possible interest rate.
Summary of Main Points:
- Parent PLUS Loans are available to parents of dependent undergraduate students who are enrolled at least half-time in a degree program at an eligible school.
- The maximum amount you can borrow with a Parent PLUS Loan is the cost of attendance at your child's school, minus any other financial aid your child receives.
- The interest rates for Parent PLUS Loans are fixed and are set each year by the U.S. Department of Education.
- You can apply for a Parent PLUS Loan online at the Federal Student Aid website.
- There are a number of repayment options available for Parent PLUS Loans.
- If you can't repay your Parent PLUS Loan, you may be able to defer or forbear your payments. You may also be able to apply for loan forgiveness.
Closing Message:
Taking out a Parent PLUS Loan is a big financial commitment, but it can be a helpful way to pay for your child's college education. By following the tips in this article, you can increase your chances of getting approved for a Parent PLUS Loan and getting the best possible interest rate.