Direct PLUS Loan Programs
Adverse Credit Definition
Federal Student Aid, an office of the U.S. Department of Education, has changed its definition of "adverse credit" with regards to the credit check completed for PLUS loan applicants.
An applicant will be considered to have adverse credit history if he/she:
- has a bankruptcy
- has a foreclosure
- has a tax lien,
- has a Loan default
- is 90 days or more delinquent
- has debt that is in collections or charged off in the preceding two years
For debts that fall in the last two categories, the combined outstanding balance would need to be greater than $2,085.
Entrance Counseling Required?
If a Direct PLUS loan applicant is determined to have adverse credit, he/she may still choose to pursue an endorser or document extenuating circumstances (complete Credit Counseling). For assistance see the PLUS Loans: Adverse Credit History or call 1-800-433-3243.
In the event that a credit decision is overridden with an appropriate endorser or through the appeals process, the Direct PLUS loan applicant will be required to complete a Direct PLUS Credit Counseling prior to loan funds disbursing.
The Direct PLUS Credit Counseling is separate from Entrance Counseling. One cannot be substituted for the other. Direct PLUS loan counseling is tied to the applicant's credit decision for a Direct PLUS loan.
It is possible that a Direct PLUS loan applicant may be required to complete the Direct PLUS loan counseling more than once during a student's academic career.
Expiration Date of Credit Check
The expiration date for Direct PLUS loan credit checks will be extended from 90 days to 180 days.
If a borrower applies for a Direct PLUS loan and is denied based on credit, then he/she works to clear up his/her credit report and wants to apply again, a new credit check will not be completed if there was already a check done in the last 180 days.