“The Department’s top priority is to ensure more students can access and successfully complete a postsecondary education," said U.S. Secretary of Education Arne Duncan. "The updated borrowing standards for the PLUS loan program demonstrate our commitment to ensuring families have access to the financing they need to reach their goal, while being good stewards of taxpayer money." New ground rules are held hostage to the Higher Education Act, which generally requires ED to wait until July to implement regulations that come out by November 1, which would extend the wait for the new rules to go into effect.
But ED said that it would push for the new standards “as soon as possible.” Some 37,000 parents and graduate students are expected to qualify that would be left out under the old standard. The PLUS loan dispute can be traced to 2011, when ED raised borrowing standards with little fanfare, leading to an increase in rejected loan applications from students at Historically Black Colleges and Universities (HBCUs). Pressure from the HBCUs led to an August draft rule for PLUS loans that would allow applicants with less than $2,085 in some kinds of overdue debt to pass a credit check. The application process will be streamlined, and ED will only go back two years instead of five when it looks into a borrower's or co-signer's credit history.
Congressman Chaka Fattah (D-Pa.), co-chair of the Congressional Black Caucus Education Task Force praised the new, relaxed standards for PLUS loans, which he said would "eliminate some of the financial barriers that have limited families from federal student loan eligibility." Lost in the shuffle was the news that ED will start to calculate — and publish — the annual cohort default rate for schools receiving PLUS loans as it does for Stafford loans. That information will shed light on how many borrowers are benefiting from the loan program’s new rules—and how many are getting in over their heads.
Some observers say that the re-jiggered PLUS Loan eligibility standard still lacks a debt-to-income requirement that will not prevent borrowers who are credit-worthy when they apply from eventually incurring more debt than they can repay when left to their own devices.
Department of Education Lowers Credit Standards for PLUS Loan Eligibility - MainStreet
