Cannot have Adverse Credit to Qualify for a Parent Plus Loan by Lindy Madill

When planning for your child’s financial aid for college you may consider taking out a Parent Plus Loan. A parent plus loan is credit based however your credit score or your income are NOT taken into consideration. There is also no limit in the amount that you can take out.

Sections 428B(a)(1)(A) and 455(a)(1) of the Higher Education Act provide that to be eligible to receive a PLUS
Loan the applicant must not have an adverse credit history, as determined pursuant to
regulations promulgated by the Secretary. The applicable regulations are 34 CFR 685.200(b) &(c)

What is adverse credit history?

Pursuant to 34 CFR 685.200, an applicant does NOT qualify for a parent plus loan with out an endorser or approved extenuating circumstances if the applicant:

has one or more debts with a total combined outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, or that have been placed in collection or
charged off (written off) during the two years preceding the date of the credit report; or
• during the five years preceding the date of the credit report, you have been subject to a
o default determination,
o discharge of debts in bankruptcy,
o foreclosure,
o repossession,
o tax lien,
o wage garnishment, or
o write-off of a federal student aid debt

Charged off means a debt that a creditor has written off as a loss, but that is still subject to collection action.

In collection means a debt that has been placed with a collection agency by a creditor or that is subject to more intensive efforts by a creditor to recover amounts owed from a borrower who has not responded satisfactorily to the demands routinely made as part of the creditor’s billing procedures.

A question for the lender if you are having difficulty getting approved for the Parent PLus Loan is how are collections or chargeoffs that are older than two years old viewed? For example, you may have a collection that has existed on your credit report for longer than two years. What is the significance of the two year date?

For more information about the ways you can qualify for a Direct PLUS Loan, contact Student Loan Support
at studentloansupport@ed.gov

information on adverse credit

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