Moderator: Financial Aid Guru
We have dealt with situations like this before, and the regulations are clear about how we can proceed. The lender is the U.S. Department of Education via the Direct Loan Program. We submit your information to Direct Loans and they perform the credit check.
Regulations from the Department of Education provide circumstances where a student could borrow the additional unsubsidized Stafford when the PLUS Loan has been approved. The regulation is as follows:
The parent has filed for bankruptcy and has provided a letter from the bankruptcy court stating that as a condition of the bankruptcy filing, the parent may not incur any additional debt.
Regarding having the father apply and see if we can get a denial, there is also guidance on that situation:
Only one parent must apply for a PLUS and be denied based on adverse credit. However, if both parents apply independently and one is approved and the other denied, the dependent student is not eligible
for the increased loan amounts.
At this point, we need a letter from the bankruptcy court stating that as a condition of the bankruptcy filing you may not incur any additional debt. Without that, we can not replace the approved PLUS Loan with unsubsidized Stafford. Please let me know if you have any questions.
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