The Truth About Grad Plus Loans: a guide Forum

[Derekj032]

The Truth About Grad Plus Loans
Like many people applying for a Grad Plus loan I have less than perfect credit, in fact my credit is down right bad. However, I was able to get approved for a Grad Plus loan without a cosigner, I will explain how the process works. Hopefully the information I provide will alleviate some of your Grad Plus induced Stress. Much of the info I will include was quite difficult to obtain, which I why I have decided to make this guide. This guide will benefit those with less than perfect credit more then those with good credit but it will serve as a guide for all those who are applying.

Give yourself PLENTY of time! I recommend starting this process during the early Fall, the year before you intend to go to law school. (If you plan to start school in the fall of 2012 start working on this in the fall of 2011) The early you begin the better off you will be.

Some basic Info about Grad plus loans

They are not credit based in the sense that most loans are. Debt to income ratio and credit scores mean nothing for this loan.
The .gov uses Equifax, this is the reporting agency to focus on
If you have bad credit you will likely be denied, but an appeal is available.

Step 1) Obtain a copy of your credit report from --LinkRemoved-- Dispute EVERTHING negative on your report. For collection accounts that I disputed I wrote “ I have no contractual or legal obligation to this creditor” I’m not sure if the aforementioned is true, but it did get nearly all collection agency’s removed from my report.

Step 2) Complete your Grad Plus loan entrance counseling and fafsa at https://studentloans.gov/

Step 3) Complete your MPN (master promissory note)

Step 4) Apply for your Grad plus loan at http://www.studentloans.gov

Appeal process
I was denied and DID not use the appeal process from the studentloans.gov website. I instead contacted direct loans and asked told them I wanted to start an appeal and gave them my information. You will contact the COD (Common Origination and Disbursement system) Their phone number is 1.800.557.7394.

Here is what they look for when doing a credit check, contrary to popular belief the info you find online and even on their websites is NOT accurate.
(This is directly from a private, direct loans email)

“We can accept documentation that the account(s) is now current, paid-in-full, is less than 90 days past due, charged off, or turned over to collections. The documentation must be on the creditor’s letterhead and specifically reference the account number(s) and be dated. For accounts not paid-in-full, the letter needs to be dated recently. Proof that a payment agreement has been entered into must be accompanied by proof of first payment.
If it is a student loan account, proof of deferment or forbearance is acceptable as long as the student loan account has not gone to collections.
In the case of a mortgage account we can accept documentation showing the account has been rectified either through payment, loan modification, or short sale.”

They do not care about collection accounts or anything as long as you are making payments. If you have a bunch of unpaid debt and you can’t find a cosigner all you need to do is contact the collection agency or creditor and set up a payment plan. Make sure you get this plan in writing and get receipts for anything you pay. Even if you are paying $10 per month on 25k, it doesn’t matter; they just want to see some kind of payment arrangement in place. It does not appear that they care about charge-offs, these are very negative credit report items but since these are closed accounts they don't matter, at least this was the case for me.

There you have it, if you follow this advice you WILL get approved for a grad plus loan. If I was able to get approved than nearly anyone can get approved.

[firemed]

Thanks. Tagged.

[aham2005]

I think I will setup a payment arrangement with the collections agency for a big debt on my credit report. Hopefully this works for me. Thanks for the info.

[kwais]

Thanks!

[DocHawkeye]

Tag.

[swc65]

I think you are right about starting the process early. Getting a credit report early will allow you to change your credit history before applying for loans. If you have delinquencies, get them up to date. If you have charge offs, contact the creditor and start a payment plan (even if it's 10 per month). Do this early enough so that your credit report will have sufficient time to update- this could take 6 months- especially if you're dealing with a debt collector.

since loan apps are often due in May of the year you start, you should start this process an entire year before you plan to being law school.

[swc65]

I think I will setup a payment arrangement with the collections agency for a big debt on my credit report. Hopefully this works for me. Thanks for the info.

When are you starting school? If it is this fall, setup the agreement and then get a letter for the collector stating your account is current. This way, if the credit reporting companies don't get the update before your loan is processed you can bring the letter to the appeals process.

[sidhesadie]

Foreclosure puts you out of the running, though, correct?

[orm518]

Great info OP. Here's the legalese:

Basically, to be approved for a Grad PLUS Loan, the student must not have adverse credit. Adverse credit, for the purpose of this loan, is defined by regulation as 90 days or more delinquent on any debt or having a credit report that shows a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a Title IV debt, during the five years preceding the date of the credit report.

So, it's less stringent than getting a personal loan without collateral approved. Basically, don't miss payments, have charge-offs, have accounts in collections. I had to pull my credit for last September at my current apartment, so I would have seen last Fall anyways any discrepancy.

In the end I won't be requesting PLUS loans, but it was good to know ahead of time if FinAid packages left lacking I could go beyond the direct loan (which all you need is a pulse for apparently).

[fastforward]

Great information. Thanks for sharing.

I have a client who had a bankruptcy due to a medical catastrophe. In many post-bankruptcy situations, credit can be more accessible, because the creditor knows the applicant has no debt and will be ineligible for years to discharge debt through bankruptcy.

Anyone know of a workaround for someone who has a recent bankruptcy to get a Grad Plus loan approved?

[DocHawkeye]

I tried the above listed number this morning and it didn't work. Instead, I called 800-557-7394 and spoke to a very helpful represenative. This number was on my denial letter.

[clone22]

Hey, are we really supposed to be applying for loans this far in advance? I'm going to need to take out Grad plus loans, but my school told me not to worry about applying for them yet and that they'll let me know when I need to start worrying about it. I'm assuming people in admissions/ finaid office know what they're talking about. Do some schools process loans through themselves or something?

thanks

[aaaaaah]

They do not care about collection accounts or anything as long as you are making payments. If you have a bunch of unpaid debt and you can’t find a cosigner all you need to do is contact the collection agency or creditor and set up a payment plan. Make sure you get this plan in writing and get receipts for anything you pay. Even if you are paying $10 per month on 25k, it doesn’t matter; they just want to see some kind of payment arrangement in place.

Wait, really? Do they need to see that you've been making payments for any specific amount of time?

By the way, thanks for the info.

[amorfati]

Just out of curiosity, how bad of credit are we talking here? I'm asking because I've missed a few credit card payments here and there over the past few years, but never for more than a month or two, and for the past six months or so I've been slowly chipping away at my debt with very regular payments. I do, however, have quite a bit of debt ($70,000 in student loans and about $8,000 in credit card debt), and I've deferred my student loans due to unemployment. I haven't heard back yet on my loan applications, so I'm getting a bit paranoid... am I being silly, or should I be scared? :/

[Rooney]

Good stuff. Taking their Entrance Counseling Course answered all of my questions

[adt231]

tag. thanks.

[swc65]

Just out of curiosity, how bad of credit are we talking here? I'm asking because I've missed a few credit card payments here and there over the past few years, but never for more than a month or two, and for the past six months or so I've been slowly chipping away at my debt with very regular payments. I do, however, have quite a bit of debt ($70,000 in student loans and about $8,000 in credit card debt), and I've deferred my student loans due to unemployment. I haven't heard back yet on my loan applications, so I'm getting a bit paranoid... am I being silly, or should I be scared? :/

They dont care about how high your debt is.

As long as you have gotten the CC payments up to date within enough time before applying for your credit report to show them as up to date, you will be fine.

[NCtoDC]

Just out of curiosity, how bad of credit are we talking here? I'm asking because I've missed a few credit card payments here and there over the past few years, but never for more than a month or two, and for the past six months or so I've been slowly chipping away at my debt with very regular payments. I do, however, have quite a bit of debt ($70,000 in student loans and about $8,000 in credit card debt), and I've deferred my student loans due to unemployment. I haven't heard back yet on my loan applications, so I'm getting a bit paranoid... am I being silly, or should I be scared? :/

How have you not heard back about your loan app? I got an instant response....I was denied. I subsequently added my husband as a cosigner and got an instant response to that...accepted. All within a 10 min. window.

[TJISMYHERO]

approved. that was quick.

[Golden]

Quick question all, does this credit check involve closed negative accounts or just current delinquent accounts

[swc65]

Quick question all, does this credit check involve closed negative accounts or just current delinquent accounts

If the closed negative account is a charge-off; it will hurt you.

[Derekj032]

Great info OP. Here's the legalese:

Basically, to be approved for a Grad PLUS Loan, the student must not have adverse credit. Adverse credit, for the purpose of this loan, is defined by regulation as 90 days or more delinquent on any debt or having a credit report that shows a default determination, bankruptcy discharge, foreclosure, repossession, tax lien, wage garnishment, or write-off of a Title IV debt, during the five years preceding the date of the credit report.

So, it's less stringent than getting a personal loan without collateral approved. Basically, don't miss payments, have charge-offs, have accounts in collections. I had to pull my credit for last September at my current apartment, so I would have seen last Fall anyways any discrepancy.

In the end I won't be requesting PLUS loans, but it was good to know ahead of time if FinAid packages left lacking I could go beyond the direct loan (which all you need is a pulse for apparently).

It is more like screw up as much as you want without filing for chapter 7-1 or have a foreclosure and you're good to go. Just make payment on all bad debt.

[Derekj032]

Quick question all, does this credit check involve closed negative accounts or just current delinquent accounts

If the closed negative account is a charge-off; it will hurt you.

It didn't hurt me. All they cared about was active account, collection, late payments etc. . . If the account is charged off it is closed and they don't look at it.

[CoriOlivia]

Thanks so much for explaining this! I hadn't looked into Plus loans yet because I don't think I'll need any but I figured I would definitely need a cosigner if I did apply.
I have a couple of credit accts that were joint with my ex and fell 30-60 days late a couple of times as we went through our divorce and split of debt/assets. They hurt my credit score pretty badly because I don't have many other accounts and am fairly young so no long credit history.

I am so glad I read this thread and know now that as long as I didn't have any major issues (bankruptcy, repos, etc), and I don't have any CURRENT late accounts, I should be approved!

[Golden]

Quick question all, does this credit check involve closed negative accounts or just current delinquent accounts

If the closed negative account is a charge-off; it will hurt you.

It didn't hurt me. All they cared about was active account, collection, late payments etc. . . If the account is charged off it is closed and they don't look at it.

Thanks Derek,
Your statements have made me more optimistic.