What To Do If Your Parent Plus Loan Is Denied

If you had applied for a parent plus loan and got a rejection, you are probably pretty frustrated about it. Do not worry, this is normal, and it happens to many people. When it comes to loans, it is a 50-50 chance.

Now, if you have received a rejection, we shall help you understand why this happened, guide you on how to re-apply for this loan and any other options that are available to you.

Okay, let's get started.

Understanding why your loan was rejected:

This is the first step. It is important to understand why your loan was rejected, so that if you are going to re-apply with the same lender or a different one, you don’t end up making the same mistakes over and over again.

Eligibility criteria:

It is always good to know the criteria for eligibility and where you probably went wrong during your application.

For you to become eligible for a parent plus loan, you must meet the following requirements;

You must be the biological parent or guardian of the student and have documentation that can prove this.
If you are a step-parent and are still married to the student's biological parent, you are eligible to borrow the loan.
The student of whom you are borrowing the loan must be a dependent undergraduate who is enrolled for at least half the time and is eligible for a federal student aid of Title IV, and must participate in the Direct Loan Program – Some community programs, however, opt out of the Direct Loan Program in order to preserve the eligibility of their Federal Pell Grant.
You must not have an adverse credit history although you may get some exceptions if there are extenuating circumstances.
Both the parent and the student must be US citizens or have eligibility status as non-US citizens. You must also not be in default of any other federal loans and in addition ensure that you meet all other eligibility requirements.
If you find that you did not meet any of these requirements, then, this may be the reason why your loan was denied.

Okay, moving on;

So, if you happen to have missed the loan due to one or two requirements, then, you can try the following as your next course of action;

Obtaining an endorser;

If poor credit history was your problem, then, you should consider getting an endorser to help you with the qualification process.

An endorser is basically a cosigner, and they must agree to repay the loan in case you default, or are unable to repay it completely.

This endorser should not have an adverse credit history, and he cannot be the student, of whom the loan is being taken.

Identify the extenuating circumstances:

We have said above that if you happen to have a poor credit report, you can receive some exemptions if there are any extenuating circumstances.

What you do, despite having received a rejection, is to try and explain the circumstances under which you received the poor credit report. There are several circumstances which may still enable you to qualify for a Parent Plus loan. These are;

Coming up with a satisfactory repayment plan between the parent and the lender with at least six months of payments being made on time.
Signing a divorce decree that proves that you are not the one responsible for the debt.
Proving that the debt in question was actually included during a bankruptcy filing.

For more on these extenuating circumstances, please visit the US Department of Education.

If they are satisfied with the circumstances, then you may become eligible to the loan after all.

Document all of the incorrect information:

In case your rejection is as a result of some incorrect information on your credit report, you will need to record this information with the US Department of Education and ensure to ask them for an appeal so they can reconsider the decision to deny.

Take care of all delinquent accounts:

If the reason for denial was due to a delinquent account, probably as a result of an adverse reaction, then, you can try fixing this by making payments on the account and making it current. Once you do this, you can either re-apply for the loan again or explain it as an extenuating event.

When you re-apply, you may be required to wait for the change in the account to reflect on your credit report.

Find someone else to apply on your behalf;

You can ask your co-parent to apply on your behalf. Remember if there are other biological or adoptive parents, they are eligible to apply for a parent plus loan. Step parents are also allowed to apply as mentioned above.

They will need to show proof of their eligibility on the grounds of being biological or step.

Consider other options:

There are plenty of other lenders in the market today, and if you do serious research, you are likely to find one who will still be willing to lend you the money regardless of your credit status. You must, however, convince them beyond any doubts that you will be able to repay the loan on time.

The loan requirements for these private lenders also differs from that of the US Department of education, such that they tend to be more lenient when considering people for loans. However, you must be prepared to pay a much higher interest rate compared to what you would have gotten from the government lender.

Consider borrowing against an asset:

This is a great idea when all other options have failed. Consider looking for a secured loan. This is how it works; when applying for the loan, provide the lender with an asset that they can attach to the loan such as a car, a house, a piece of land, etc. All these are known as collateral.

The collateral, in this case, will act as your cosigner, such that in case you default, the lender has every right to sell off the asset and recover the loan amount.

It is however not as easy as it sounds, because they will need to evaluate the value of the asset against the loan applied for.

The asset must be worth more than the total value of the loan, plus, they must include another aspect such as depreciation over the loan period, and come up with a figure that will ensure they are covered fully if you do not repay the loan.

It may be a great idea, but ensure to be very careful on the repayment once you attach your property, because it may be a way for you to lose it if the loan is not paid up.

Apply for an unsubsidized loan:

So, if getting a parent plus loan is completely impossible, the student can still apply for a direct unsubsidized loan.

He will need to get in contact with their financial aid office and follow the correct procedure of applying for financial aid.

If you are a freshman or sophomore, you are entitled to borrow at least $4,000, and if you are senior or junior, you can get up to $5,000. The school will, however, determine what you shall get based on how much they have available in the budget and how many students have applied for financing.

Once you receive financing and you have reached the limit set by the school, you may need to look for additional money elsewhere in order to complete your studies.

Conclusion:

There are many companies nowadays lending to students, and getting a rejection for your Parent Plus Loan must never be a point of giving up. The student himself is entitled to a student loan, and therefore, it is important to try all avenues.

Remember however to only borrow what you need. Education loans are not dischargeable through bankruptcy, and if you happen to default, there can be some serious consequences, not to mention a bad mark on your credit report.