How PLUS Loans Work

By: Dave Roos

Qualifying for a PLUS Loan

All you need to qualify for a PLUS loan is a good credit history.
All you need to qualify for a PLUS loan is a good credit history.
Michael Krasowitz/Getty Images

Unlike most other federal financial aid programs, PLUS loans aren't need-based. They're credit-based. To qualify for a PLUS Loan, you don't have to prove financial need; you only have a show a stable and healthy credit history. This is established through a standard credit check.

Your credit history doesn't have to be spotless to qualify for a PLUS Loan. You can have a few late payments and high balances in your past, but you can't have any major boo-boos that would count as adverse credit.


Adverse credit, as defined by the Higher Education Opportunity Act (HEOA) means that one of the following events shows up on your credit report:

  • You're currently more than 90 days late on a debt payment, including credit card payments, car loans, mortgage payments and other student loans, etc.
  • In the last five years, you've declared bankruptcy, defaulted on other educational loans, or have been the subject of a foreclosure, repossession or wage garnishment

[source: Oklahoma Guaranteed Student Loan Program].

If you think that your credit history might show some adverse credit, order a credit report before you apply for a PLUS Loan and see if you can negotiate settlements or alternative payment plans with any of your creditors.

If you're denied a PLUS Loan because of bad credit, you still have some options. First, you can find a relative or friend with better credit to endorse the loan. Endorsing is the same as co-signing, which means that the person who endorses the loan is equally responsible for the timely repayment of the loan. If the parent is late or delinquent in repaying the loan, the credit of the endorsing party will also suffer.

Another possibility if you have adverse credit is to provide proof of extenuating circumstances that may have contributed to the lackluster credit history. According to the Ensuring Continued Access to Student Loans Act of 2008 accepts the following extenuating circumstances:

  • Up to 180 days late on mortgage payments
  • Up to 180 days late on medical payments

[source: Oklahoma Guaranteed Student Loan Program]

Because PLUS Loans are federal loans, you won't qualify if you or your student are currently in default on another federal student loan, or owe a refund on a federal education grant.

If your credit history is in good shape, then you're good to go. Now let's learn more about the two different kinds of PLUS Loans: direct and FFEL loans.