As part of an effort to ensure more families can afford a higher education and promote the responsible use of taxpayer dollars, the U.S. Department of Education proposed new regulations that broaden access for student and parent borrowers under the federal Direct PLUS loan program, the agency announced.
“The Obama Administration is committed to keeping college accessible and affordable and helping families make thoughtful and informed choices to fund a higher education in today’s economy,” said U.S. Secretary of Education Arne Duncan.
The current adverse credit history regulations have not been updated since the Direct Lending program was established in 1994, according to the Department of Education.
The changes will allow more families to borrow under the PLUS lending program. Specifically, the proposed regulations would update the definition of adverse credit history and require PLUS loan counseling for approved borrowers with an adverse credit history. If a potential borrower’s combined adverse debt is $2,085 or less, the potential borrower will not be considered to have an adverse credit history.
Among the proposed changes are: clearly stating the adverse credit history eligibility standards for potential borrowers; minimizing the time period a borrower’s credit history is reviewed from the last five years to the last two years for charge offs and collections to determine adverse credit history; and authorizing the Secretary to adjust the combined outstanding balance adverse debt threshold of $2,085.
The Department plans to publish the final rules by Nov. 1, which would allow borrowers to take out a PLUS loan under the new criteria for the 2015-16 school year.