Parent PLUS Loan Denied? Here’s What You Can Do Next

Parent PLUS loans allow parents to take out federal loans to cover their child's college costs when other federal loans fall short. In the 2023-24 school year, they made up 12% of all educational loans, according to the College Board. However, parent PLUS loans have stricter eligibility criteria, and not all applicants are approved. If your application is denied, you still have options to ensure your child can pay for college.

In this guide, learn what to do if your parent PLUS loan is denied and explore some alternatives to consider.

See Also: Best Parent Student Loans: Choosing Private or PLUS Loans

Why parent PLUS loans get denied

Unlike other federal student loans, parent PLUS loans require a credit check. The most common reason for denial is having what's called an “adverse credit history.” This doesn't necessarily mean you have a low credit score. It's about specific financial issues flagged during the credit review.

“You can have a low credit score and not have an adverse credit history. An adverse credit history means you've defaulted on debt or have debt in collections, or are subject to wage garnishments or tax liens or other issues,” says Robert Farrington, founder of The College Investor.

According to Federal Student Aid, any of the following are considered adverse credit history:

• An outstanding balance of $2,085 or more that's delinquent for 90 or more days
• Accounts in collections or charged off within the last two years
• Default on debt within the last five years
• Bankruptcy discharge within the last five years
• Repossession or foreclosure within the last five years
• Charge-off of federal student aid debt within the last five years
• A wage garnishment or tax lien within the last five years

You may also have your PLUS loan application denied simply because it wasn't possible to perform a credit check.

“One reason for denial that is not really a denial is if someone has a freeze or block on their credit report and forgot to take it off prior to applying,” says Jack Wang, college financial aid advisor at Innovative Advisory Group.

If your credit report has a security freeze, be sure to temporarily lift it so the credit check can proceed.

Steps to take if a parent PLUS loan is denied

If your parent PLUS loan application is denied, you still have options to move forward. Depending on the circumstances, you can appeal the decision or add an endorser to the loan.

Appeal the decision

If the loan was denied because of incorrect information or unique circumstances, you can file an appeal. Federal Student Aid refers to this process as addressing “extenuating circumstances.” Examples include debt caused by identity theft or debts from a divorce that are no longer your responsibility.

To appeal, you'll need to provide documentation that explains your situation. For example, if the denial was related to identity theft, you might submit police reports or statements from your credit card issuer. Appeals can be submitted online or by calling 1-800-433-3243.

Add an endorser

Another way to secure a parent PLUS loan is to add an endorser, which works similarly to a cosigner. An endorser agrees to share the responsibility for loan repayment if you're unable to make payments. However, there are restrictions: the endorser cannot be the student and must not have an adverse credit history.

To move forward, the endorser will need to complete the Endorser Addendum form, which can be done online through the Federal Student Aid website.

Request to increase your federal borrowing limit

A parent PLUS loan denial may allow your child to qualify for higher federal student loan limits.

Typically, dependent students have lower borrowing limits compared with independent students. However, if your parent PLUS loan is denied, your child may be eligible for the same limits as an independent student.

An administrator in your school's financial aid office can tell you if this option is available and guide you through the next steps.

Alternative options for financing college

There are still other ways to finance your child's education even if you ultimately can't get a parent PLUS loan.

Start by having your child submit the Free Application for Federal Student Aid (FAFSA). This application determines eligibility for federal grants, such as the Pell Grant, as well as work-study opportunities. Many schools and private organizations also use your FAFSA data to award scholarships and other aid.

Private student loans can also help fill funding gaps. Unlike federal loans, which come from the Department of Education, private loans are offered by banks, credit unions, and other lenders. Some lenders even offer parent-specific loans, which may work if you meet their credit requirements.

“Depending on the credit profile, parents may be able to use a private loan. Or some schools may even offer the income share agreement option for the student, which is to the student and generally does not require a credit check,” says Wang.

If you're not eligible for a private loan, another family member with strong credit could act as a cosigner for your child's student loan. This can open up more borrowing opportunities for your family.

Current private student loan rates