Going Forward, New Federal Loan Guidelines for College Seen as Helpful

With a history of bad credit and more than $1,000 in mounting debt, Carolyn Saunders has been worrying that she might be deemed ineligible to take out a loan to help her 17-year-old son, Dwayne, when he starts college next fall.

“I messed up my credit real bad when I was younger, and I’ve had a whole lot of problems ever since,” said Saunders, 44, who works as an administrative assistant in Baltimore. “I don’t want my bad decisions to hurt my son who wants to go to college.”

New federal guidelines announced by the U.S. Department of Education last week will now make it easier for Saunders and others like her to borrow money, even if they have up to $2,085 in collections or have debts that have been written off by creditors. In addition, bad credit histories will be examined over a two instead of five-year period.

DOE officials say that it’s an effort aimed at making college affordable for all. But it’s also an attempt to appease college presidents who expressed outrage over the Obama administration’s decision to change the eligibility requirements for the federal Direct PLUS loan program.

Last September, Secretary of Education Arne Duncan formally apologized to HBCU presidents for the debacle, which caused thousands of their students to drop out of college after they were denied loans. Representatives from HBCUs were part of a committee that presented Duncan with the new set of recommendations.

“The Obama Administration is committed to keeping college accessible and affordable and helping families make thoughtful and informed choices to fund a higher education in today’s economy,” said Duncan. “These changes allow us to continue to be good stewards of taxpayer dollars and open the doors of college to ensure all students have the opportunity to walk through.”

Duncan said other proposed changes to the federal loan guidelines will include: