What You Need

If you have received an adverse credit decision, you may still be eligible to receive a Direct PLUS Loan. In order to become eligible, you may take one of the following actions:

  1. Obtain an endorser.
    • An endorser is someone who does not have an adverse credit history and agrees to repay the loan if you do not repay it.
    • If you are a parent borrower, the endorser may not be the student on whose behalf you are requesting the Direct PLUS Loan.
  2. Document to the satisfaction of the U.S. Department of Education that:
    • The information causing the adverse credit decision is incorrect or has been corrected.
    • OR
    • There are extenuating circumstances relating to the adverse credit history. (Note: Endorsers aren't eligible for this option.) The Secretary is able to use discretion and, based on your circumstances, consider whether extenuating circumstances allow you to qualify for a loan.
      • The chart below provides a non-exhaustive list of examples of extenuating circumstances.
      • If you believe that your situation fits within these examples, or presents a situation that otherwise qualifies for extenuating circumstances, review the information in the Proof of Extenuating Circumstances column to determine if your circumstances could qualify you for review.
      • Review does not guarantee approval.
      • Previous approval based on extenuating circumstances does not guarantee further approvals.
      • Additional documentation may be required beyond the basic requirements listed below.
      • Loss of a job, poor economy, etc. alone are generally not considered extenuating circumstances.

Adverse credit conditions include, but are not limited to:

 

Adverse Credit Reason

Description

Proof of Extenuating Circumstances

1

Charged Off Account

Any account (open or closed) listed as an unpaid charge off/write off with a balance greater than zero in the past 5 years preceding the date of the credit report.

  • Borrower is authorized user on the account.
  • Account has been paid in full.
  • Satisfactory repayment arrangement has been established and six months of voluntary, consecutive, on-time, full monthly payments have been made.
  • Example of documentation for the above:

    • Documentation on creditor company letterhead documenting one of the above.

  • Account/debt included in a Chapter 13 Bankruptcy.
  • Required documentation:

    • Final Order from the bankruptcy court indicating the account in question is included in the bankruptcy.

  • Debt Consolidation.
  • Required documentation:

    • A letter from the debt consolidation company on the company's letterhead showing all accounts included in the debt consolidation.
    • AND

    • Proof of six months of voluntary, consecutive, on-time, full monthly payments have been made.

  • Divorce.
  • Required documentation:

    • Final Divorce Decree showing that the borrower is not responsible for repayment of the debt in question.

2

Collection Account

Any account (open or closed) listed as an unpaid collection with a balance greater than zero in the past 5 years preceding the date of the credit report.

By definition, accounts in collection are more than 90 days past due.

  • Borrower is authorized user on the account.
  • Account has been paid in full.
  • Satisfactory repayment arrangement has been established and six months of voluntary, consecutive, on-time, full monthly payments have been made.
  • Example of documentation for the above:

    • Documentation on creditor company letterhead documenting one of the above.

  • Account/debt included in a Chapter 13 Bankruptcy.
  • Required documentation:

    • Final Order from the bankruptcy court indicating the account in question is included in the bankruptcy.

  • Debt Consolidation.
  • Required documentation:

    • A letter from the debt consolidation company on the company's letterhead showing all accounts included in the debt consolidation.
    • AND

    • Proof of six months of voluntary, consecutive, on-time, full monthly payments have been made.

  • Divorce.
  • Required documentation:

    • Final Divorce Decree showing that the borrower is not responsible for repayment of the debt in question.

3

90 or More Days Delinquent on any Debt

Any account (open or closed) that is currently 90 or more days past due

  • Borrower is authorized user on the account.
  • Account has been paid in full.
  • Satisfactory repayment arrangement has been established and six months of voluntary, consecutive, on-time, full monthly payments have been made.
  • Example of documentation for above:

    • Documentation on creditor company letterhead documenting one of the above.

  • Account/debt included in a Chapter 13 Bankruptcy.
  • Required documentation:

    • Final Order from the bankruptcy court indicating the account in question is included in the bankruptcy.

  • Debt Consolidation.
  • Required documentation:

    • A letter from the debt consolidation company on the company's letterhead showing all accounts included in the debt consolidation.
    • AND

    • Proof of six months of voluntary, consecutive, on-time, full monthly payments have been made.

  • Divorce.
  • Required documentation:

    • Final Divorce Decree showing that the borrower is not responsible for repayment of the debt in question.

  • Federal student loan has been consolidated.
  • Required documentation:

    • Proof of consolidation:
      • Letter from current lender showing loan in question was consolidated and the consolidation loan is not delinquent.
      • Letter from prior lender showing loan was bought through a consolidation and the consolidation loan is not delinquent.

  • Federal loan is no longer in default.
  • Required documentation:

    • Documentation on loan holder/servicer letterhead verifying that borrower has either made satisfactory repayment arrangements on the loan or has rehabilitated the loan.

4

Wage Garnishment

Borrower's wages have been garnished in the past 5 years preceding the date of the credit report.

  • Garnishment has been released.
  • Required documentation:

    • Documentation on official letterhead showing the garnishment was released or paid in full.

5

Repossession/
Voluntary Surrender

Borrower has had a repossession or a voluntary surrender within the past 5 years preceding the date of the credit report.

  • Account has been paid in full.
  • Satisfactory repayment arrangement has been established and six months of voluntary, consecutive, on-time, full monthly payments have been made.
  • Example of documentation for the above:

    • Documentation on creditor company letterhead documenting one of the above.

  • Divorce.
  • Required documentation:

    • Final Divorce Decree showing that the borrower is not responsible for repayment of the debt in question.

  • Car loan has been reinstated.
  • Required documentation:

    • Documentation on creditor letterhead showing borrower is still responsible for paying the loan.
    • AND

    • Six months of voluntary, consecutive, on-time, full monthly payments have been made.

6

Defaulted Loan that is Claim Paid

Any Title IV debt that is currently in default.

  • Federal student loan has been consolidated.
  • Required documentation:

    • Letter from current lender showing loan in question was consolidated.
    • Letter from prior lender showing loan was bought through a consolidation.
    • AND

    • The consolidation loan is not delinquent.

  • Loan is no longer in default.
  • Required documentation:

    • Documentation on loan holder/servicer letterhead verifying that borrower has either made satisfactory repayment arrangements on the loan or has rehabilitated the loan.

7

Foreclosure Process Started

Mortgage account has the loan listed as having the foreclosure process started

  • Divorce.
  • Required documentation:

    • Final Divorce Decree showing that the borrower is not responsible for repayment of the debt in question.

  • Loan Modification Agreement.
  • Required documentation:

    • Finalized signed and notarized modification paperwork and proof of payment in accordance with the modification agreement.

  • Mortgage is Paid-in-Full.
  • Required documentation:

    • Release of Deed from the lender.

  • Short Sale has been approved and completed.
  • Required documentation:

    • Notarized HUD-1 statement.

8

Deed in Lieu of Foreclosure

Deed in Lieu is being reported in the past 5 years preceding the date of the credit report.

  • Divorce.
  • Required documentation:

    • Final Divorce Decree showing that the borrower is not responsible for repayment of the debt in question.

  • Mortgage is Paid-in-Full.
  • Required documentation:

    • Release of Deed from the lender.

  • Short Sale has been approved and completed.
  • Required documentation:

    • Notarized final HUD-1 statement.

  • Timing Issue regarding deed in lieu.
  • Required documentation:

    • Proof from Mortgage Company that Deed in Lieu is over 5 years old.

9

Foreclosure

Borrower has had a foreclosure in the past 5 years preceding the date of the credit report.

  • Short Sale has been approved and completed.
  • Required documentation:

    • Finalized HUD-1 statement.

  • Mortgage was paid in full before foreclosure.
  • Required documentation:

    • Cancellation of Sherriff Sale.
    • Release of Deed from the lender.
  • Timing Issue regarding foreclosure.
  • Required documentation:

    • Proof from Mortgage Company that foreclosure is over 5 years old.

10

Bankruptcy Discharge

Borrower has a discharged Chapter 7, 11 or 12 Bankruptcy in the past 5 years preceding the date of the credit report.

  • Timing Issue regarding bankruptcy.
  • Required documentation:

    • Discharge Paperwork that shows bankruptcy was discharged over 5 years ago.

  • Bankruptcy chapter conversion.
  • Required documentation:

    • Discharge paperwork or paperwork showing that a Chapter 7, 11 or 12 bankruptcy has been converted into a Chapter 13 bankruptcy.

11

Tax Lien

Borrower has a State, County or Federal Tax Lien in the last 5 years preceding the date of the credit report regardless of file date

  • Satisfactory repayment arrangement has been established and six months of voluntary, consecutive, on-time, full monthly payments have been made.
  • Example of documentation for the above:

    • Documentation on official letterhead documenting one of the above.

  • Account/debt included in a Chapter 13 Bankruptcy.
  • Required documentation:

    • Final Order from the bankruptcy court indicating the account in question is included in the bankruptcy.

  • Lien was incorrectly filed.
  • Required documentation:

    • Letter on official letterhead showing that the lien was filed in error. This is sometimes in the form of a release.

  • Lien has been released.
  • Required documentation:

    • Copy of the actual release.
    • Proof of payment.

There may be other documentation required depending on your specific circumstances.

If you feel that the information your credit decision is based on is incorrect or you believe you qualify for a review based on extenuating circumstances, you may begin the process in one of two ways:

  • 1. Log in to StudentLoans.gov and select "Document Extenuating Circumstances" on the left navigation bar. Follow directions. Applicant Services will contact you with further instructions.
  • 2. Contact Applicant Services between 8:00 AM to 8:00 PM, Eastern Time, Monday through Friday. Applicant Services may be reached toll-free, at 1-800-557-7394.

Click the browser's back button to return to the previous page.