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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 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 with Federal Student Aid). For assistance see the student loans website or call 800-557-7394).

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 loan counseling prior to loan funds disbursing.

The Direct PLUS loan 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.

Additional Option for Dependent Students

If the parent is denied, it is possible for the student to apply for additional Federal Direct Unsubsidized Loan instead.

The following Direct Unsubsidized Loan limits may be added to the student borrower's combined Direct Subsidized and Unsubsidized loan limits:

  • Up to $4,000 for a first or second year student
  • Up to $5,000 for a third, fourth, or fifth year undergraduate student

If the parent is denied, it is possible for the student to apply for additional Federal Direct Unsubsidized Loan instead. The following Direct Unsubsidized Loan limits may be added to the student borrower's combined Direct Subsidized and Unsubsidized loan limits.