As we’ve written before, changes to the PLUS loan program resulted in actually harming middle and lower-class students; closing off an income avenue to attending school. This disproportionately affected historically black colleges and universities and the students who wish to attend them as a larger percentage of African-American students and parents make use of both the Graduate and Parent Direct PLUS loans.
Nice Try But Try Again
In 2011, the Department of Education added requirements for lenders to take into account when examining applications for both divisions of the PLUS loan program. New applicants are not allowed to have charged off previous loans nor have any loans sent to a collection agency for a period of five years prior to the application. These requirements were thrown on top of the existing ones for bankruptcy, foreclosures and loans delinquent for over 90 days. Although this idea to lower the number of applicants who might statistically be unable to repay the loans is a step in the right direction, the number of new requirements was excessive and wound up excluding the very people for whom the PLUS loan program was developed.
Despite not having the authority to make these changes (that lies with Congress), they were not challenged by the House or Senate and so each new requirement was allowed to stand. Almost three years later, over 400,000 parents alone were denied access to the loans they had planned on for their children’s education.
We’re Here To Help, Now Give Us Back The Check
The Secretary of Education, Arne Duncan, spoke to a group of black college leaders in September last year at the Department of Education’s annual Historically Black College and University Conference. He apologized for the unintended consequences and promised to fix the issue at a scheduled rules meeting he said would be held in February. Secretary Duncan very frankly told them that “I am not satisfied with the way we handled the updating and changes to the PLUS loan program, communication internally and externally was poor”.
Although he gave no guesses as to the possible outcome, the options can only be repeal of the new requirements or changes that lessen the impact. Since the last time the Department made these changes without the proper authority, it’s most likely that the rules committee will have to simply make suggestions to Congress that will eventually be passed into law through the legislative process. As of March 6th, there has been no announcement of either the rules meeting or any changes that have been recommended to the PLUS loan program on the Education Department’s website.
Just Kidding! Here’s Your Money!
Fortunately, the Department of Education had already begun in August to allow parents and students who had been turned down for PLUS loans to reapply. However, this was only agreed to after members of Congress finally began asking questions about how these new requirements were affecting their constituents. Thanks to the efforts of Rep. Marcia Fudge (D-OH) and others, 98 percent of all parents and students who reapplied soon found themselves approved for a PLUS loan.
There is no denying that the Federal Student Loan program still needs some work. However, cutting parents and students out of the picture is not the way to do it. This does nothing to help lower and middle class students; it just makes the Department of Education’s bottom line appear better by artificially decreasing the future percentages of defaulted loans. Secretary Duncan and his rules committee (as well as the House and Senate) have many options available to them. Restructuring the repayment system for parents and students to reflect the current economic climate provides relief to those families and keeps students flowing into accredited schools. For any changes to take effect in time for the 2014-2015 school year, both parties will need to move quickly when the Education Department’s recommendations are released.