Getting Tough On Parent PLUS

Career College Central summary:

As the Education Department prepares to begin negotiations next month on changes to the eligibility requirements to Parent PLUS Loans, a report released Wednesday says that the government needs to tighten the standards for those loans. The controversial changes that the Education Department made in October 2011 to the Parent PLUS Loan program — which led to loan denials for roughly 40,000 families — were poorly executed but also too modest, according to the report by the New American Foundation.
The paper calls on policy makers to either add an “ability to pay” metric to the Parent PLUS credit check, cap the loans, or end the program altogether and increase the loan limits on other federal loans. The department’s changes to the Parent PLUS Loan program were met with backlash from black college leaders, whose institutions often rely on the loans to help students cover tuition.
Under pressure from black college leaders and several members of Congress, the department last year said it would consider appeals from parents who were originally denied the loans. The department has since said that it has reversed the denials in more than 98 percent of the appeals that have been filed. U.S. Education Secretary Arne Duncan also personally apologized to black college leaders for the way his agency rolled out the changes to the program.
The report also suggests that institutions have been relying on the Parent PLUS Loan program “to hide their prices from students and skirt accountability measures.” Since Parent PLUS loans are not counted by the department in assessing the default rates at an institution, the report says that institutions may steer parents toward PLUS loans as a means to reducing their exposure to defaults.

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