NAICU Washington Update

Concerns Continue about Plus Loan Eligibility

July 25, 2013

The stricter enforcement of Parent PLUS loan eligibility requirements that was initiated by the Department of Education in October 2011 continues to be cause for concern.

The Department did not initially publicize this operational change, and the issue first came to NAICU’s attention when a member institution reported an abrupt increase in loan denials.  In general, the denial rates have been much higher than average at institutions that serve large numbers of low-income students, and particularly at Historically Black Colleges and Universities.  The issue has generated press interest, and efforts to relax the more stringent underwriting standards have intensified. 

To date, the Department hasn't changed the criteria used in making its decisions on Parent PLUS eligibility.  However, it has announced it will actively reconsider denials upon appeal, and issued processing guidance about an expedited appeals process.  In addition, as of June 30, the Department began to “identify for schools those borrowers who may be eligible for reconsideration” of a PLUS loan denial.  Previously, the Department had sent e-mails or letters directly to those PLUS loan borrowers who were eligible for reconsideration.

This spring, the Department conducted four regional hearings to gather information in preparation for this fall’s planned negotiated rulemaking sessions.  It identified several topics, including  PLUS loans, as potential subjects for future sessions.  However only one, on gainful employment, has so far been scheduled.  Representatives from many colleges, particularly HBCUs, testified about the reasons for, and consequences of, the stricter eligibility standards.  Their comments expressed particular concern about limiting college access and declines in college enrollments, as well as in preventing defaults.

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