Dependent undergraduate students become eligible to borrow additional unsubsidized Stafford loan funds when their parents have been denied a PLUS loan and during other exceptional circumstances, as specified in 34 CFR 682.201(a)(3), excerpted below. The additional loan limits including $4,000 per year during the first two years and $5,000 per year during the remaining years, with an additional cumulative borrowing limit of $23,000.

The regulation provides for the financial aid administrator to make a determination as to whether the student will be eligible for the additional unsubsidized Stafford loan. The determination is based on the family's financial circumstances and the financial aid administrator's opinion that the parents will likely be "precluded from borrowing under the PLUS Program".

Most financial aid administrators require the parent to get a denial letter from the bank for a PLUS loan in order to qualify the student for additional unsubsidized Stafford. However, in some situations the parent will be approved for a PLUS loan despite exceptional circumstances such as an ongoing bankruptcy proceedings (i.e., the parent's credit history is not yet adversely affected since the debt has not yet been discharged in bankruptcy). In such situations most financial aid administrators will qualify the student for additional unsubsidized Stafford. The parent's inability to repay the PLUS loan is sufficient grounds to qualify the student for additional unsubsidized Stafford.

682.201(a)(3)
(3) For purposes of a dependent undergraduate student's eligibility for an additional unsubsidized Stafford loan amount, as described at Section 682.204(d), is a dependent undergraduate student for whom the financial aid administrator determines and documents in the school's file, after review of the family financial information provided by the student and consideration of the student's debt burden, that the student's parents likely will be precluded by exceptional circumstances (e.g., denial of a PLUS loan to a parent based on adverse credit, the student's parent receives only public assistance or disability benefits, is incarcerated, or his or her whereabouts are unknown) from borrowing under the PLUS Program and the student's family is otherwise unable to provide the student's expected family contribution. A parent's refusal to borrow a PLUS loan does not constitute an exceptional circumstance.