On Wednesday, the U.S. Education Department announced the publication of final rules governing the Federal Direct PLUS Loan Program, according to an agency press release.
The new regulations will expand student access by relaxing the program's underwriting criteria. An additional 370,000 parents and graduate students are expected to qualify for PLUS loans under the rule, The Chronicle of Higher Education reported.
The final regulations update the definition of "adverse credit history" for PLUS loan applicants, and implement a streamlined application process for borrowers to obtain a PLUS loan, specifically for those with adverse credit histories.
The department tightened the program's rules into their current form in 2011. The move caused loan denial rates to spike and led to sharp enrollment drops at some institutions – historically black colleges and universities, in particular. Earlier this year, the Education Department announced that it would review the changes as part of a negotiated rulemaking process. That rulemaking panel concluded in May, reaching agreement on the definition of adverse credit history under the regulation, and the department published a draft rule in August.
The final rule hews closely to the draft, with a few changes and additions. The new regulations establish a threshold debt amount of $2,085, indexed to inflation, below which a potential borrower is considered to not have an adverse credit history. The rules also require borrowers with adverse credit histories to complete PLUS loan counseling before receiving a loan.
Additionally, the department will begin to collect and publish information about the performance of PLUS loans, including default rate information based on credit history characteristics of PLUS loan borrowers and individual institutional default rates. That information will shed light on how many borrowers are benefiting from the loan program – and how many are getting in over their heads.
Although the rule is scheduled to take effect on July 1, department officials signaled that they intended to move up the timetable, to March at the latest. It is unclear when the first institutional default rates for PLUS loans would be published.
Related Links
U.S. Education Department Press Release
http://www.ed.gov/news/press-releases/us-education-department-announces-final-rule-strengthen-federal-direct-plus-loan
Federal Register
https://s3.amazonaws.com/public-inspection.federalregister.gov/2014-25266.pdf
The Chronicle of Higher Education
http://chronicle.com/article/Coming-Soon-for-PLUS-Loans-/149593