The US Department of Education will publish new rules in the Federal Register tomorrow (Thursday, October 23) that are intended to strengthen the Federal Direct PLUS Loan Program. The new regulations aim to expand access to higher education and better reflect programmatic changes that have occurred since the PLUS loan program began more than 20 years ago.
In a statement, U.S. Secretary of Education Arne Duncan said, “The updated borrowing standards for the PLUS loan program demonstrate our commitment to ensuring families have access to the financing they need to reach their goal.”
Here are some notable changes:
- Establishes a threshold debt amount of $2,085, indexed to inflation, below which a potential borrower is considered to not have an adverse credit history.
- Defining terms such as debt “charged off” and “in collection” to more accurately determine whether an applicant has an adverse credit history.
- Reducing the time period of a borrower’s credit history that is considered to determine adverse credit history from the last five years to the last two years for charge offs and collections.
- Requiring that PLUS Loan applicants who, despite having adverse credit are able to receive a PLUS Loan based on either demonstrating extenuating circumstances or by obtaining an eligible endorser, participate in loan counseling.
More information can be found here.