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Education Dept. Proposes New PLUS Loan Standards

Education Dept. Proposes New PLUS Loan Standards
April 18, 2014

The U.S. Department of Education is proposing new eligibility requirements for Parent PLUS loans. Under draft regulatory language sent this week to members of the department’s negotiated rule making panel, parents would generally be barred from taking out PLUS loans if they have any type of debt exceeding $2,085 that is 90 or more days delinquent or that has been sent to a collection agency or charged off. The proposal also changes the look-back period for that “adverse credit” history from five years to two years.

Under a separate policy change that goes into effect July 1, families that are denied a Parent PLUS loan because of an adverse credit history may appeal to the Education Department, which can then provide the loan if there are "extenuating circumstances."

The department’s standards for obtaining a PLUS have been a source of controversy since at least 2011, when officials quietly tightened the requirements. Leaders of historically black colleges and universities and for-profit colleges -- which enroll large numbers of students who rely on PLUS loans -- have said the changes were denying underserved students access to the loans they need to pay for college. Presidents of black colleges, in particular, have pushed the Obama administration to make it easier for families to access the loans. Some consumer advocates and think tanks, on the other hand, argue that the department should keep its credit standards -- or even tighten them further -- so that parents aren’t saddled with large amounts of debt that they cannot possibly repay.

Debit Cards and State Authorization

The department also circulated this week a revised version of its proposal to more tightly regulate campus debit cards. The latest draft keeps in place some of the restrictions on the marketing of campus debit cards as well as the ban on certain account and ATM fees.

In addition, department officials put out a second draft of their rewritten state authorization rule. The proposal would reinstate a requirement -- which a federal judge struck down for procedural reasons in 2012 -- that providers of online education obtain approval from each and every state in which they enroll students.

The new draft of that rule keeps in place a controversial provision that would essentially require states to subject all distance education providers to a formal regulatory review (as opposed to approving the program on the basis of its accreditation or another reason). Some state regulators have said that requirement would impose substantial new burdens on them; it would also likely require many states to change their laws.

The rule making panel will meet in Washington next Wednesday through Friday to discuss the proposals. The department also last week formally added a fourth negotiating session, which will take place May 19-20. 

 

 

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