Feds Loosen Financial Requirements for PLUS Loan Applications

Students celebrate at the beginning of commencement ceremonies for New York University at Yankee Stadium in New York City May 21, 2014.
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Big changes are on the way for the Federal Direct PLUS Loan Program (Parent Loan for Undergraduate Students): The U.S. Department of Education is loosening rules for eligibility in a move targeted at making it easier for parents and students to pay for a college education.

On Wednesday the department announced and published the final regulations. Among the core adjustments are revised borrower eligibility; a streamlined application for a PLUS Loan, particularly for those with “adverse credit history”; and an updated definition of “adverse credit history,” which had not been adjusted since 1994.


“The Department's top priority is to ensure more students can access and successfully complete a postsecondary education,” U.S. Secretary of Education Arne Duncan said in a statement. “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.”

Based on the final regulations, an applicant will be considered to have an “adverse credit history” only if that applicant has one or more debts, with a total outstanding balance of more than $2,085, that are more than 90 days delinquent as of the date of the applicant’s credit report. The outstanding-balance threshold is also subject to an increase over time, based on the inflation rate as measured by the consumer price index.


Moreover, the new rules reduce the look-back period for the applicant’s credit history from five years to two. But even if an applicant has an adverse credit history, he or she could still receive a loan if there are “extenuating circumstances” or if the applicant obtains a loan endorser and gets loan counseling.

Members of the Congressional Black Caucus and HBCU leaders lauded the efforts of the Education Department, releasing statements that praise the revised regulations, which could be particularly helpful for HBCUs that tend to cater to lower-income students.


“For many years, the Federal Direct PLUS Loan program provided a vital lifeline to students and their families to achieve their dreams of academic and professional success,” Rep. Frederica Wilson (D-Fla.) said in her statement. “The U.S. Department of Education’s previous changes to the rule unfairly placed an enormous burden on low-income and first-generation college students, specifically those attending Historically Black Colleges and Universities, by tightening credit checks and expanding the review of credit history.”

“HBCUs and the students they serve have endured three years of hardships caused by denied access to PLUS Loans,” United Negro College Fund President and CEO Michael Lomax said in another statement. “This has been a distraction from the real work that needs to be done—preparing students with the skills needed in a competitive, global economy.”  


Eleven North Carolina HBCUs sent a joint letter to Education Secretary Arne Duncan, voicing their cohesive support as well: “The new regulation proposed by the Department is a good start toward repairing the damage and opening the doors of education to future students. We are pleased that by exempting minor blemishes on parents’ credit records and shortening look-back periods for these credit checks, the proposed regulation honors the fundamental purpose of PPL, which is to help students afford the college education they need and deserve and that we, as a nation, need them to have.”

The Education Department is also doing outreach to ensure that students and parents looking at colleges will know of the resources available to them to make the investment more affordable.


“We’ve been doing a lot of direct work with the colleges themselves because that’s how [the loan] typically winds up getting packaged,” Deputy Secretary of Education James Shelton III told The Root. “Typically what we try to make sure of is that the counselors and others are aware of changes to our financial-aid packages. There’s a regular communication stream between federal student aid and the counselors across America about financial aid. That’s the way we found to actually reach students in high school that are thinking about going to college.”

The loan counseling that is being offered is also a good point of contact for disseminating the information about the changes, Shelton added: “One of the things people need to pay attention to is that we’re providing loan counseling to folks so they’ll have a better sense of all of their different grant and credit options.”


Shelton noted that the Department of Education did look at the impact of regulations on HBCUs, although the final changes in regulations are designed to benefit the entire higher-education landscape: “When we did our analysis, we did [it] across the entire college spectrum but also looked specifically at what happened at different types of colleges, including HBCUs.”

Under the new regulations, the Education Department is expecting almost 400,000 more students and parents to become eligible for PLUS Loans. Many of the applicants are now expected to qualify under the extenuating-circumstances provisions or through an endorser.


The final regulations aren’t scheduled to go into effect until July 1, 2015, but the Education Department is looking to implement the changes as early as possible—“no later than the end of March,” Shelton told reporters on a press call Wednesday.

Breanna Edwards is a newswriter at The Root. Follow her on Twitter.

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