Panel Nears Agreement On New Standards For PLUS Loans

Career College Central summary:

  • The latest round of the U.S. Education Department’s negotiated rule-making process for consumer-protection issues began with a tentative agreement on proposed regulations of PLUS loans. Early this week, negotiators were divided over proposals regarding state authorization of online education and college-affiliated debit cards, a day before they are supposed to vote on final proposals.
  • The department’s latest proposal on PLUS loans, which are available to graduate students and parents of dependent undergraduate students, was the subject of gentle debate during the morning hours. Under the department’s proposal, delinquent debt of $2,085 or less would not disqualify potential borrowers from the program.
  • That’s a substantial change from the existing rule, under which borrowers with any amount of debt in collection or "charged off" on their credit histories during the preceding five years could be disqualified. Those standards caused a rash of loan denials when they were introduced, in 2011, especially among the families of students who attend historically black colleges, prompting outrage as well as talk of a lawsuit against the department.
  • Much of the discussion on Monday centered on allowing the $2,085 debt exemption to be adjusted for inflation in the future, using the annual Consumer Price Index, or CPI. Some negotiators suggested that the CPI was too "volatile" for adjusting the exemption and that it would lead to many incremental annual changes. But Chuck Knepfle, the financial-aid director at Clemson University, said that tying the exemption to the CPI could bring up the debt exemption "a little at a time—that’s the purpose of indexing."

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