The U.S. Department of Education has announced a final rule to strengthen the Federal Direct PLUS Loan Program. The latest regulations revise the definition of “adverse credit history,” which would disqualify a student or family from receiving the loans.
The new regulations set a debt threshold of $2,085, below which a potential borrower is not considered to have an adverse credit history. In addition, instead of considering a borrower’s credit history for the past five years in order to determine eligibility, the department will only look at charge offs and collections over the past two years.
The new regulations are scheduled to go into effect on July 15, 2015. The delay in implementing the new regulations prompted Johnny C. Taylor Jr., president of the Thurgood Marshall College Fund to issue a strong statement condemning the delay. Taylor stated that “the delayed implementation of Parent PLUS Loan regulations is as disturbing as the unlikely scenario of our government issuing a statement indicating that they have a cure for Ebola and then announcing the cure will not be implemented until July 2015. Students forced to remain at home with college debt, no degree, and no jobs are some of the outcomes of the Education Department’s decision to tighten credit standards on Parent PLUS Loans with no warning. It’s unacceptable to now make them wait until July 2015.” Taylor estimates that since 2011, 28,000 students at the nation’s historically Black colleges and universities were negatively impacted by the Education Department’s decision to tighten credit standards. The reduction in enrollments may have costs HBCUs more than $150 million in tuition revenues.
In regard to the delay in implementing the new rules, Education Secretary Arne Duncan said that department is designating the final regulations for early implementation.