The U.S. Department of Education Wednesday announced additional changes to the Parent Plus Loan requirements, which have been the source of much controversy recently.
The new rule updates the requirements for “adverse credit history,” the application of which recently set off a firestorm when numerous parents found themselves rejected for the aid. Effective July 1, 2015, applicants who are determined to have adverse credit history and are approved on the basis of extenuating circumstances or a qualifying co-signer will be required to receive loan counseling prior to receiving the loan dispersement. Among other changes to the rule:
“The Department expects that the final regulations will increase the number of PLUS loan applicants who pass the adverse credit history check. We estimate an increase of approximately 370,000 PLUS loan applicants who will pass the adverse credit history check under the final regulations. As a result of the changes in these final regulations, these applicants will not need to apply for reconsideration of an initial PLUS loan denial due to an adverse credit history, saving them time and effort,” an advance copy of the department’s updated regulations state.
“Although the typical borrowing profiles of parents and graduate/professional students are very different, currently ED applies the same credit standards to both parent and graduate/professional borrowers (i.e., PLUS borrowers must have no adverse credit history in order to borrow),” said Justin Draeger, president of the National Association of Student Financial Aid Administrators, in a statement submitted to the department ahead of the rule changes, who spoke in favor of revising the “adverse credit history” definition. “The term ‘no adverse credit history’ is not a strict measure of underwriting, yet borrowers under both Parent PLUS and Grad PLUS can borrow up to the cost of attendance, which can be tens of thousands of dollars in some programs.”
“These are two very different populations, so when you look at adverse credit, it might be worth treating them differently,” Draeger said of the application of standards to undergraduate versus graduate students.
NASFAA did have some questions about the requirement to undergo loan counseling for those with adverse credit history, saying “while logical, we are not aware of any studies that demonstrably show that requiring additional counseling of parents will have a positive effect,” and urging the department to more closely examine the additional requirement, questioning the standing and qualification of the department to provide such counseling.
The presidents and chancellors of the 11 North Carolina HBCUs—including Dr. David Olah, Barber Scotia College; Dr. Rosalind Fuse-Hall, Bennett College; Charles Becton, Elizabeth City State University; Dr. James A. Anderson, Fayetteville State University; Dr. Ronald L. Carter, Johnson C. Smith University; Dr. Harold L. Martin, Sr., North Carolina A&T State University; Dr. Debra Saunders-White, North Carolina Central University; Dr. Everett Ward, Saint Augustine’s University; Dr. Gaddis Faulcon, Shaw University and Dr. Donald Reaves, Winston-Salem State University—called the policy changes “a good start toward repairing the damage and opening the doors of education to future students,” and said they are “pleased” to observe “the proposed regulation honors the fundamental purpose” of Parent Plus Loans to help students achieve an education.
