Final regulations published in the Federal Register on October 23, 2014 are intended to improve student access to postsecondary education by increasing availability of PLUS loan funds and help to limit over borrowing. PLUS loan counseling will be required for borrowers who are determined to have an adverse credit history, but who qualify for a PLUS loan due to extenuating circumstances, or who obtain an endorser for the PLUS loan.
These final regulations will:
- Revise the student PLUS loan borrower eligibility criteria to state more clearly that the PLUS loan adverse credit history requirements apply to student, as well as parent, PLUS loan borrowers
- Add definitions of the terms ‘‘charged off’’ and ‘‘in collection’’
- Specify that a PLUS loan applicant has an adverse credit history if the applicant has one or more debts with a total combined outstanding balance greater than $2,085 that are 90 or more days delinquent as of the date of the credit report, or that have been in collection or charged off during the two years preceding the date of the credit report
- Provide that the combined outstanding balance threshold of $2,085 will be increased over time based on the rate of inflation, as measured by the Consumer Price Index for All Urban Consumers (CPI–U)
- Revise the provision that specifies the types of documentation the Secretary may accept as a basis for determining that extenuating circumstances exist for a PLUS loan applicant who is determined to have an adverse credit history
- Specify that an applicant for a PLUS loan who is determined to have an adverse credit history, but who obtains an endorser or one who documents to ED’s satisfaction that extenuating circumstances exist, must complete PLUS loan counseling offered by ED before receiving a PLUS loan
Extending the Validity of Credit Check from 90 Days to 180 Days
In the NPRM, USDE announced its intention to modify its procedures so that a credit check indicating that a PLUS loan applicant does not have an adverse credit history will remain valid for 180 days, instead of the current 90 days.
With this change to the Department’s procedures, any action that would normally trigger a credit check (for example, the submission of a Direct PLUS Loan Request or a PLUS loan origination record) will not do so if a prior credit check on the applicant that revealed no adverse credit issues was conducted within the past 180 days.
USDE plans to implement this procedural change as soon as possible, and will inform schools in advance of the effective date of the change through an announcement on the Information for Financial Aid Professionals (IFAP) Web site.
Enhanced PLUS Borrower Consumer Information
Enhanced consumer information will include voluntary PLUS loan counseling for all student and parent PLUS borrowers. The voluntary PLUS loan counseling will be easily accessible to borrowers who are seeking PLUS loans and will also be made available through links on other USDE web sites.
The following are some of the items that will be included in the voluntary counseling for all PLUS borrowers:
- A calculator that will allow borrowers to estimate their future required monthly payment amount under available repayment plans
- Tools to assist borrowers in determining how factors such as taking out additional PLUS loans or deferring repayment until the student leaves school will affect the required monthly payment amount and total loan amount to be repaid
- Available repayment plans for student and parent PLUS borrowers
- Information about loan consolidation
- Budgeting information, with an emphasis on borrowing only the minimum amount needed
- Strategies for avoiding delinquency and default
The voluntary counseling will be made available prior to the start of the 2015–16 academic year.
Generally, final rules published by November 1 are effective the following July 1. However, the Higher Education Act (HEA) permits ED to designate any regulation for optional early implementation prior to July 1, and any conditions for early implementation. As such, ED will implement these final rules as soon as possible and will publish a separate Federal Register notice informing the community of the exact implementation date. ED will also work with schools to inform parents and students of the changes to the PLUS loan adverse credit history standards.