What Is Adverse Credit History?
Adverse credit is a negative mark on your credit report that will disqualify you from receiving federal PLUS loans.
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Adverse credit history is the Department of Education’s credit standard for evaluating parents and graduate students who are applying for federal direct PLUS loans.
You won’t qualify for PLUS loans if you have adverse credit, except in specific circumstances that we outline below.
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What is adverse credit history?
Generally speaking, you have adverse credit if you have a negative mark on your credit report. If you’re unsure whether you do, pull your free credit report to double-check.
The Education Department considers your credit adverse if you:
Are currently behind by 90 days or more on one or multiple debts totaling more than $2,085.
Have had a debt that was charged off or placed in collections in the last two years.
Have been subject to at least one of the following in the past five years:
Default
Bankruptcy discharge
Foreclosure
Repossession
Tax lien
Wage garnishment
Write-off of a federal student loan
How to get a PLUS loan with adverse credit
If you have adverse credit, you can still get a PLUS loan if you complete PLUS Credit Counseling and do one of the following:
Apply with an endorser who doesn’t have an adverse credit history. Like a co-signer, an endorser is someone who agrees to pay your debt if you don’t. Have your co-signer complete an endorser addendum online. They’ll need their own FSA ID and an Endorser Code or Award ID.
Appeal the credit decision. Submit documentation showing that information on your credit report is incorrect or that there are extenuating circumstances related to your credit. The FSA site details what documentation you'll need to support your appeal based on the type of adverse credit history you have. Once all documentation has been received, the education department says it will respond within seven to 10 business days. Appealing doesn’t guarantee you’ll be offered a PLUS loan.
Other student loan options
Even if you have adverse credit, you should still apply for student aid by filling out the Free Application for Federal Student Aid, or FAFSA. Your child may be eligible for federal direct loans, scholarships or work-study programs.
From a credit perspective, federal direct subsidized or unsubsidized loans are easier to get than PLUS loans because they don’t require a credit check.