Student loan qualification made easier.
Federal PLUS loans are available to parents of undergraduates students or directly to students pursuing a graduate or a professional degree. Direct PLUS loans are provided by the US Department of Education and are for eligible students attending schools participating in its Direct Loan Program. That program was recently updated, making more students eligible to receive such loans.
Overview
With federal PLUS loans, the US Department of Education is the lender. The borrower is either a parent or a student — the program requires that applicants have no adverse credit history.
Loan amounts are determined by the student’s total cost of attendance as determined by the college or university. Financial aid is subtracted; borrowers may apply for loans covering the rest.
To apply for a Direct PLUS loan, students must complete a Free Application for Federal Student Aid (FAFSA). The process for apply for a PLUS loan is handled by the school’s financial aid office. Borrowers should contact the school for guidance.
Credit Problems
Hundreds of thousands of parents are denied PLUS loans due to adverse credit. In the application process, a credit check is performed. If your credit history is poor, you may still qualify for a loan through an endorser or another individual that promises to repay the loan if you default.
Families should know that if parents borrow money, the endorser cannot be the child benefiting from the loan. You must seek a third party to stand behind the loan.
Final Rule
Because some applicants have been denied loans, effectively barring them or their children from attending college, the Education Department has revisited the lending requirements. Under a final rule issued last week, an additional 370,000 loan applicants are expected to qualify according to the Chronicle of Higher Education.
The eligibility battle goes back to 2011 when lending rules were tightened. Loan rejections surged and enrollment dropped significantly at some colleges. Especially affected were historically black colleges and universities, who welcomed the announcement. However, consumer advocates have warned that debt levels for some borrowers could become unmanageable.
The new rules will not go into effect until the 2015-2016 academic year. Under the revised plan the Education Department will look at a borrower’s history for the past two years instead of the current five-year standard. Debts in collection and delinquencies are certain dings that can prompt a rejection.
See Also — PLUS Student Loans
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