How Much Do You Get if Denied a Parent PLUS Loan?

The short answer is: if a Parent PLUS loan is denied, the student becomes eligible for an additional amount of Unsubsidized Federal Direct Loans. The exact amount depends on the student’s year in school, but it can range from $4,000 to $5,000 for the academic year. Let’s unpack this crucial piece of financial aid knowledge and explore the nuances behind it, as well as other valuable information related to Parent PLUS loan denials.

Understanding the Parent PLUS Loan and Its Denial Process

The Parent PLUS loan is a federal loan available to parents of dependent undergraduate students to help pay for college. It’s a critical resource for families who need assistance bridging the gap between savings, grants, scholarships, and the student’s own federal loans. However, unlike other federal student loans, approval for a Parent PLUS loan hinges on the parent’s credit history. A history marred by delinquencies, defaults, or bankruptcies can trigger a denial. Understanding this denial process is the first step in navigating alternative financial aid options.

It’s important to understand that a denial is not the end of the road. It opens up new avenues for students to access additional federal aid that they might not have otherwise qualified for. This boost in federal loan eligibility is designed to prevent students from forgoing their education due to a parent’s inability to secure a PLUS loan.

The Silver Lining: Increased Unsubsidized Loan Limits

When a Parent PLUS loan application is denied, the dependent student’s eligibility for Unsubsidized Federal Direct Loans increases. These loans, unlike subsidized loans, accrue interest from the moment they are disbursed. However, they offer a valuable source of funding when other options are limited. Here’s a breakdown of the additional amounts students can access:

• Freshman: An additional $4,000 in unsubsidized loan funds.
• Sophomore: An additional $4,000 in unsubsidized loan funds.
• Junior/Senior: An additional $5,000 in unsubsidized loan funds.

These increased loan limits can make a significant difference in affordability, allowing students to cover tuition, fees, and living expenses. The key is to understand this benefit and take proactive steps to access these additional funds.

How to Access the Additional Unsubsidized Loans

Once the Parent PLUS loan is denied, the student needs to notify their college’s financial aid office. The financial aid office will then adjust the student’s financial aid package to include the additional unsubsidized loan amount. This usually involves completing a request form or providing documentation of the Parent PLUS loan denial.

It’s important to act swiftly. Financial aid offices often have processing deadlines, and delaying the notification can jeopardize the student’s ability to receive the additional funds in a timely manner. Open communication with the financial aid office is crucial throughout this process.

Weighing Your Options: Is the Increased Loan Enough?

While the increased Unsubsidized Loan limit is a welcome benefit, it might not completely cover the financial gap created by the Parent PLUS loan denial. It’s essential to evaluate the overall cost of attendance and compare it to the available resources, including the student’s savings, grants, scholarships, and the additional unsubsidized loan.

If the increased loan isn’t enough, families should explore other options, such as:

• Private Student Loans: These loans are offered by banks and other financial institutions and often require a creditworthy cosigner.
• Payment Plans: Many colleges offer payment plans that allow families to spread tuition payments over several months.
• Scholarships and Grants: Continue to search for and apply for scholarships and grants, even after the initial financial aid package is offered.
• Reducing College Costs: Consider attending a less expensive college, living at home, or taking summer courses to accelerate graduation and reduce overall costs.

The denial of a Parent PLUS loan can be a stressful experience, but it can also be a catalyst for exploring creative and cost-effective ways to finance education.

Appealing the PLUS Loan Denial or Finding an Endorser

It’s also important to remember that the denial is not necessarily final. There are two primary avenues for potentially reversing the denial:

• Appeal Based on Extenuating Circumstances: If the parent believes the denial was based on inaccurate information or that extenuating circumstances contributed to their poor credit history, they can appeal the decision directly to the Department of Education.
• Finding an Endorser: A creditworthy endorser (essentially a cosigner) can agree to repay the loan if the parent defaults. This provides the Department of Education with additional assurance and can lead to loan approval.

Exploring these options can be worthwhile, especially if the parent believes they have a valid reason for the credit issues or if they have a reliable individual willing to endorse the loan.

Frequently Asked Questions (FAQs)

Here are 12 frequently asked questions about Parent PLUS Loan denials and their implications:

1. What exactly constitutes a Parent PLUS Loan denial?

A Parent PLUS Loan is denied when the parent applying does not meet the credit requirements set by the Department of Education. This can include a history of delinquent debt, default, bankruptcy, or other adverse credit events.

2. How do I know if my Parent PLUS Loan application has been denied?

The Department of Education will send a notification to the parent who applied, typically via email or mail, informing them of the denial and the reason for the decision. It’s crucial to carefully read this notification.

3. Does a Parent PLUS Loan denial affect the student’s credit score?

No, a Parent PLUS Loan denial does not affect the student’s credit score. The credit check is conducted on the parent, not the student.

4. What is the difference between a Subsidized and Unsubsidized Federal Direct Loan?

Subsidized loans do not accrue interest while the student is enrolled at least half-time and during deferment periods. Unsubsidized loans, on the other hand, accrue interest from the moment they are disbursed. Both types of loans are federal loans and offer borrower protections like income-driven repayment plans.

5. Can the additional Unsubsidized Loan amount cover the full cost of tuition?

The additional Unsubsidized Loan amount may not cover the full cost of tuition, especially at private or out-of-state institutions. It’s essential to consider the overall cost of attendance and explore other funding sources.

6. How long does it take for the student’s financial aid package to be adjusted after a Parent PLUS Loan denial?

The processing time can vary depending on the college’s financial aid office. It’s generally recommended to contact the financial aid office immediately after the denial to expedite the process. Expect it to take a few weeks.

7. What if the parent can successfully appeal the Parent PLUS Loan denial?

If the parent’s appeal is successful and the Parent PLUS Loan is approved, the student will no longer be eligible for the additional Unsubsidized Loan amount. The original financial aid package will be reinstated.

8. Can the student also apply for private student loans if the Parent PLUS Loan is denied?

Yes, the student can apply for private student loans if the Parent PLUS Loan is denied. However, most private student loans require a creditworthy cosigner, especially for undergraduate students.

9. What is an “endorser” for a Parent PLUS Loan?

An endorser is someone who agrees to repay the Parent PLUS Loan if the parent defaults. The endorser must have good credit and meet specific requirements set by the Department of Education.

10. If a parent applies for a Parent PLUS Loan and is approved, but only for a partial amount, does the student get any additional Unsubsidized loan funds?

No. The student only qualifies for additional unsubsidized funds if the Parent PLUS loan is fully denied. If the loan is approved for a partial amount, the student will not be eligible for additional funding.

11. What happens if the Parent PLUS loan is initially denied but then later approved through an appeal or with an endorser after the student already receives additional unsubsidized loans?

In this situation, the student’s financial aid package needs to be re-evaluated. Once the PLUS loan is approved, the student will lose eligibility for the extra unsubsidized funds. The student may need to return the additional unsubsidized loan funds already received, and the PLUS loan will cover the costs instead.

12. Where can I find more information about Parent PLUS Loans and the denial process?

You can find more information on the Federal Student Aid website (studentaid.gov), your college’s financial aid office, and by consulting with a financial aid advisor. Always rely on official sources for accurate and up-to-date information.