Denied Grad plus, bad credit, no cosigner

[hunterx2]

Hi guys,

Going to be D1 this fall at an expensive private school. I just got denied the Grad plus loan because of adverse credit (outstanding debts under collections). I owe quite a bit and I can't pay it off right now. No remaining assets. Both parents have way worse credit than I do, so they can't cosign. Where do I get a loan for 70k to cover D1 year ???? Thanks.

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[a runner]

Sorry, but you're not going to be able to get a loan anywhere. GradPLUS is your only real option. No bank will approve you for a private loan, not that there are any real options out there anyways. I don't know how much you owe in collections, but you need to pay that off any way you can. Once paid off, you should qualify immediately (assuming no other adverse credit). If you absolutely cannot pay it, then you need to find a co-signer somehow. A spouse? A sibling? Aunt or uncle? Grandparent?

I would recommend paying of the collections, even if you have to borrow money from a family member short term to do it. You can always use your cost of living refund check after school starts to pay the person back right away. Just make sure that the only thing holding you back from getting approved is the collections before you do that.

 

[DrMidlife]

Unfortunately you are not going to find bad credit loans to cover 4 years of professional school. Credit rules get more strict in the private sector. I'd be surprised if you have options other than to back out, wait out your adverse history, and reapply in ~5 years after keeping your nose clean. (Spend less than you make. Never be late on a payment. Etc.)

I don't understand why med/dent schools aren't screening/advising on credit history. I have some classmates who repeatedly almost fail out due to maxed out credit cards, non-deferrable private loans from undergrad, car payments etc. There's no money lying around to give to these folks to get them any relief. One classmate honestly expected to be able to work full time during med school. One works graveyard shifts at $10/hr. So much for being competitive for a good residency. Better to defer med school.

Sorry for your situation. Best of luck to you.

 

[a runner]

Unfortunately you are not going to find bad credit loans to cover 4 years of professional school. Credit rules get more strict in the private sector. I'd be surprised if you have options other than to back out, wait out your adverse history, and reapply in ~5 years after keeping your nose clean. (Spend less than you make. Never be late on a payment. Etc.)

I don't understand why med/dent schools aren't screening/advising on credit history. I have some classmates who repeatedly almost fail out due to maxed out credit cards, non-deferrable private loans from undergrad, car payments etc. There's no money lying around to give to these folks to get them any relief. One classmate honestly expected to be able to work full time during med school. One works graveyard shifts at $10/hr. So much for being competitive for a good residency. Better to defer med school.

Sorry for your situation. Best of luck to you.

Even waiting 5 years may not help in this situation. If the collections is still there after 5 years, they'll still get denied because there's no time limit on collections adverse events. The only way to get rid of it is to pay it off or if the creditor charges the account off. Then 5 years after the charge-off, you'll be able to qualify. It may take years for the account to be charged off though. And you have to pay taxes on the charged-off amount when it does happen.

 

[DrMidlife]

I would recommend paying of the collections, even if you have to borrow money from a family member short term to do it. You can always use your cost of living refund check after school starts to pay the person back right away. Just make sure that the only thing holding you back from getting approved is the collections before you do that.

I don't see how this works.

If GradPlus denied the loan, then there's adverse credit history, and you can't just pay that off and get GradPlus to be happy. There's no way this gets turned around in time to start school this year.

How does the OP pay rent if he/she uses cost of living money for something else? Credit cards? How does that realistically work over 4 years with no income?

Bottom line, financial instability is not compatible with success in med school, unless you have balls of steel and won't lose sleep or exam points over not being able to make rent.

 

[a runner]

The only other thing I can think of would be to get the military scholarship. I'm guessing it's too late for this year, but maybe you could defer until next year and apply for a military scholarship in the meantime.

 

[DrMidlife]

Even waiting 5 years may not help in this situation. If the collections is still there after 5 years, they'll still get denied because there's no time limit on collections adverse events. The only way to get rid of it is to pay it off or if the creditor charges the account off. Then 5 years after the charge-off, you'll be able to qualify. It may take years for the account to be charged off though. And you have to pay taxes on the charged-off amount when it does happen.

My assumption is that during the 5 years of waiting, the collections debt and other obligations are being paid off through earned wages from a job. Not a charge-off.

In the consumer world, 7 years is what it takes for a credit history to get clean. GradPlus needs to see something like 90 days clean with no active problems.

 

[a runner]

I don't see how this works.

If GradPlus denied the loan, then there's adverse credit history, and you can't just pay that off and get GradPlus to be happy. There's no way this gets turned around in time to start school this year.

How does the OP pay rent if he/she uses cost of living money for something else? Credit cards? How does that realistically work over 4 years with no income?

Bottom line, financial instability is not compatible with success in med school, unless you have balls of steel and won't lose sleep or exam points over not being able to make rent.

You have to do what you have to do given the situation you're in. It's never too late to clean up your financial plate and start living financially sound.

I'm not sure how much money we're talking about here in collections, but I'm assuming it's under $10k. If it's more than that, there is a much bigger problem. I'm also assuming that most schools (especially private ones) give more money for cost of living than is absolutely needed for a single student to live off of. So I would say if the school gives ~$25k for living expenses the first year, pay the family member back $5-$10k (or however much is owed) and use the other $15-20k living frugally the first year.

As far as collections accounts, my understanding is that you will get denied if there is a collections item listed on your credit, regardless of the amount. It could be $50 from a phone bill and you still get denied. As soon as you pay it off, if you show proof of it being paid off, your application will get approved at that point. There is no waiting period. Better to have it paid off and reflecting that on your credit before applying though.

 

[a runner]

My assumption is that during the 5 years of waiting, the collections debt and other obligations are being paid off through earned wages from a job. Not a charge-off.

In the consumer world, 7 years is what it takes for a credit history to get clean. GradPlus needs to see something like 90 days clean with no active problems.

That would be a good way to go too. Hopefully it wouldn't take 5 years though. By then, good luck getting readmitted to dental (or med) school.

 

[hunterx2]

I have around $7000 in credit card debt. Not worth the lost year of income to apply again. DS is not exactly easy to get into, and it cost me 3k in app fees and travel/lodging just to get in. Most of that 7k debt will be outside the statute of limitations in a couple of months, so I have absolutely no intention of paying it. Why would Grad plus deny me for a debt that will expire soon ?? I also have undergrad loans but that doesn't count against me for grad plus.

 

[Mad Jack]

Grad plus loans require that you have all of your debt current or paid off. If you pay off your creditors or settle with them, there's a good chance you will be able to get a Grad Plus loan- they're really lax about who they dole them out to. They just want to make sure you don't have creditors breathing down your neck right now. Get your debt straight or you will never be able to attend professional school- well, unless you sell your soul to the military and have them take care of the bills for you, but you might be ineligible for security clearance due to your credit history, so even that might not be an option.

Glad I dropped into this thread, totally reminded me to pay my cards for the month lol.

 

[a runner]

I have around $7000 in credit card debt. Not worth the lost year of income to apply again. DS is not exactly easy to get into, and it cost me 3k in app fees and travel/lodging just to get in. Most of that 7k debt will be outside the statute of limitations in a couple of months, so I have absolutely no intention of paying it. Why would Grad plus deny me for a debt that will expire soon ?? I also have undergrad loans but that doesn't count against me for grad plus.

It sounds like this debt is probably listed as charged-off on your credit report. I change my advice in this case. Paying off the debt may not allow you to qualify for GradPLUS this year. I believe the charged-off debt will continue to be listed on your credit for 7 years from the original delinquency and GradPLUS technically won't be approved for 5 years from the original delinquency or the charge-off date (not sure).

It sounds like paying it off may not get you approved, but since you have already applied and been denied, you can call Applicant Services at 1-800-557-7394 to see if there is any way to remediate your application to be approved for this academic year. It's worth a phone call to see where you stand, that way you know if the only option is to look for a co-signer. And maybe they can tell you when this adverse event will pass the 5 year mark to not hold you back from being approved.

I agree that it benefits you to do whatever it takes to be able to attend dental school this year, or at the very worst, defer your acceptance until next year. If that means having to ask your great uncle to co-sign, then do it. If that means deferring until next year and applying for the military scholarship, then do it.

 

[Beargryllz]

You could join the army and pay $0 for school while you collect a stipend to pay off any existing debts.

 

[Mad Jack]

I have around $7000 in credit card debt. Not worth the lost year of income to apply again. DS is not exactly easy to get into, and it cost me 3k in app fees and travel/lodging just to get in. Most of that 7k debt will be outside the statute of limitations in a couple of months, so I have absolutely no intention of paying it. Why would Grad plus deny me for a debt that will expire soon ?? I also have undergrad loans but that doesn't count against me for grad plus.

Leaving your debts permanently unsettled can come back to bite you in the ass later in your career, keep that in mind. Even though they cannot legally pursue you further, that's going to be a part of your history for life. Per the rules for the Grad Plus program, once your debt is discharged per the statute of limitations, you will have to wait five years to be eligible for a loan approval:

Credit Criteria
Credit approval is based on federally mandated criteria, not a credit score. In order to qualify, you must not have any of the following items on your credit report:

• Any current delinquency of 90 days or more
• Any of the following within the preceding five years of the date of the credit check: default, bankruptcy, discharge, foreclosure, repossession, tax lien, wage garnishment, write-off of a Title IV debt, open collection.

Here is the guide to Grad Plus loans: http://www.ifap.ed.gov/dlbulletins/attachments/DLB0703Attach.pdf

So yeah, you're screwed. Go earn some money and pay off your debts, or never be a dentist. Your move, choose wisely.

You could join the army and pay $0 for school while you collect a stipend to pay off any existing debts.

Won't work. You can't get the security clearance required of an officer with an adverse credit history.

 

[DrMidlife]

Just so I understand this, you're saying you feel no responsibility to pay a debt of $7k AND you expect to be loaned $250k+ for D school.

Would you loan money to yourself?!?

 

[hunterx2]

Hmmm... OK how about declaring bankruptcy ? Seems like bankruptcy will normally prevent someone from getting the Grad plus, EXCEPT chapter 13 bankruptcy. On the studentloans.gov site it says it is acceptable to submit a document with a chapter 13 ruling and that would suffice for getting the loan. Is it wise for me to declare for chapter 13 ? I would still have to pay part of it, and of course any attorney fees, but it would be less than the full 7k. Also, its not discharged yet until a couple of months from now, after the statute of limitations, so I can conceivably still pay.

No, I don't feel I should have to pay off ANY of that 7k. Most of it was charged for services unrendered (unauthorized auto billing). I have appealed multiple times without success.

 

[quadruple agent]

OP, it would appear that old collections *with a payment plan in place* will get you approved on appeal. I do not have first-hand experience of this. This is anecdata from friends of friends, around the internet, etc. Idea is a letter current dated on creditor's letterhead saying "OP has agreed to pay $X per month on this debt until paid off."

Worth a shot.

As for other commenters...you ever hear the one about walking a mile in the other guy's shoes?

 

[quadruple agent]

Here's a potentially helpful post--I have not tried this myself:

http://www.top-law-schools.com/forums/viewtopic.php?f=15&t=154130

 

[DrMidlife]

As for other commenters...you ever hear the one about walking a mile in the other guy's shoes?

Walked it. Deferred med school acceptances twice to pay off medical bills that had to go on credit cards. Cancer, bitches.

Hmmm... OK how about declaring bankruptcy ?No, I don't feel I should have to pay off ANY of that 7k. Most of it was charged for services unrendered (unauthorized auto billing). I have appealed multiple times without success.

So sorry, but I have no pity for "unauthorized transactions" or some sense of entitlement that the world owes you the privilege of a DDS or DMD.

Be a good person or just go work for big pharm or wall street. Much much easier that way. People like me will be riding your ass forever.

 

[hunterx2]

Thanks for that link. Its not good enough to just have a plan in place though. You have to actually make 6 months of payment to be eligible for grad plus. I have less than 3 months before school starts so that's out the window. It says the same in the link. So that's why I'm thinking of bankruptcy...

Be a good person or just go work for big pharm or wall street. Much much easier that way. People like me will be riding your ass forever.

So much easier said than done. I know ppl applying to med/dental because they couldn't hack it in business/finance. There is so much luck and uncertainty. Medicine is much more structured. You get to move on as long as you pass.

 

[a runner]

Thanks for that link. Its not good enough to just have a plan in place though. You have to actually make 6 months of payment to be eligible for grad plus. I have less than 3 months before school starts so that's out the window. It says the same in the link. So that's why I'm thinking of bankruptcy...



So much easier said than done. I know ppl applying to med/dental because they couldn't hack it in business/finance. There is so much luck and uncertainty. Medicine is much more structured. You get to move on as long as you pass.

It can take a long time to go through bankruptcy court. There are proceedings you have to go through with the creditor(s). The debt will still show up as in default until it is discharged at the end of a bankruptcy filing. This may not be a realistic option for starting in the fall. Is there anyone you can borrow $7k from for 3-4 months?

 

[Silent Cool]

Aren't there lots of people with credit card debt in professional school? Seems like most people I know have CCs that are near the max....or is the issue collections breathing fire?

 

[a runner]

Aren't there lots of people with credit card debt in professional school? Seems like most people I know have CCs that are near the max....or is the issue collections breathing fire?

Yeah, you can't be in default on a credit card and get approved for GradPLUS. I think the exact statute is that you cannot be 90 days past due on any debt. There are other things that count as "adverse credit" too. DrMidlife posted the whole list in the other thread here.

 

[DrMidlife]

Aren't there lots of people with credit card debt in professional school? Seems like most people I know have CCs that are near the max....or is the issue collections breathing fire?

If your max is about $5k then you can make smaller pain-postponement payments, ie $100/mo (eventually costing you 3x what you borrowed on the card, but at least your credit's not trashed). Assuming you're willing to pay.

 

[knv2u]

How much money are we talking about here?

I think your options are to:

1. Dispute the collection / credit card accounts with hopes that the collection agencies do not respond to the inquiry within 30 days or are unable to validate the debt, in which case the collection accounts could be removed from your credit report (the Fair Credit Reporting Act would require deletion under either of those circumstances).

2. Try to settle the accounts.

3. If you postpone enrollment or are able to maintain some employment while in school, a Chapter 13 bankruptcy may be an option. While a discharge under Chapters 7, 11, 12, and 15 is considered evidence of an adverse credit history, current Department of Education policy does not consider a Chapter 13 to be an adverse credit history. I know that this is counterintuitive. The problem with this strategy is that you would need a plan confirmation order which can take about 60 days, you would need the trustee's permission to incur new debt including student loans, and you might have problem's getting the court to approve a plan with very limited income; however, I think it is worth a shot. You should seek counsel, particularly one familiar with student loans if you take this route. Ill try to find the relevant policy in the CFR for your attorney if needed.

DISCLAIMER: Nothing in this post should be construed as legal advice and no warranties, express or implied, are made to the information herein.

 

[knv2u]

I saw your other post. Chapter 13 bankruptcies aren't discharged for three to five years; however, I think you only need a confirmation order, which can be had in about 60 days. Keep in mind that a Chapter 13 bankruptcy attorney will like charge $3k+ and then you would need to pay the filing fee in addition to sum money to your creditors. You could probably settle for less.

I would try just disputing the items first.

 

[knv2u]

The debt will still show up as in default until it is discharged at the end of a bankruptcy filing.

Charge offs and other delinquent notations are replaced with "included in bankruptcy" until discharge on your credit report; it wouldn't or at least shouldn't show a charge-off. If it did, that would be grounds to dispute the notation.

Thanks for that link. Its not good enough to just have a plan in place though. You have to actually make 6 months of payment to be eligible for grad plus.

Where are you getting the six month limitation period from with regards to a Chapter 13?

 

[hunterx2]

Charge offs and other delinquent notations are replaced with "included in bankruptcy" until discharge on your credit report; it wouldn't or at least shouldn't show a charge-off. If it did, that would be grounds to dispute the notation.



Where are you getting the six month limitation period from with regards to a Chapter 13?

Hey knv2u

Thanks for the replies. The 6 months has nothing to do with chapter 13. That's getting the grad plus loan. They need to see you've made 6 months of consecutive payments on any collections prior to getting the grad plus, which is why I wish I knew about this 6 months ago. Its too late now, with school starting in 2 months. I'm actually doing exactly as you are saying, except the chapter 13. That's not really bankruptcy. That's just a court ordered payment plan. And really, I might end up paying MORE than 7k, adding the lawyer fees. Not worth it considering the salary loss (and even the yearly cost of living) is greater than 7k.

 

[DrDreams]

Sorry to revive an old thread

I have a question, I had a debt on my credit that was from 2006 but I got a report of my equifax and i know grad plus runs equifax. everything that was listed there i have paid off. but the 2 debts from 2006 were not on my credit report. Am i OK?

 

[deleted158872]

... the student debt/tuition situation in this country is hideous...
The-power-that-be obviously doesn't want to invest in the future.