The Obama administration announced Wednesday that it had finalized plans to ease the credit requirements for obtaining federal student PLUS loans, Inside Higher Ed reported.
The new rule, which will go into effect next year, makes it so that the Education Department will only review two years of credit history and will exempt up to $2,085 — adjusted for inflation each year — in delinquent debt from counting against an applicant. The current rules look at five years of history.
Student PLUS loans are federal loans that graduate or professional degree students and parents of dependent undergraduate students can use to help pay education expenses. The U.S. Department of Education is the lender.
Now it will be easier for students and parents with damaged credit histories to take out these PLUS loans.
Department officials estimate that the changes will allow about 370,000 PLUS loan applicants to now pass the initial credit history check who wouldn’t have done so under the current rule, according to Inside Higher Ed.
“With these new regulations we’ll reach and better serve many more families and students,” Jim Shelton, deputy secretary of education, said Wednesday.
Officials also announced that for the first time they will be publishing the rate at which a college’s former students and the parents of those students default on PLUS loans.
The process for this has not been clearly defined yet. It is also unclear if colleges with high PLUS loan default rates will face any penalties.
Currently, federal law cuts off funding to institutions whose direct loan default rate is too high, but colleges are not held responsible for the as-unpublished PLUS loan default rates.
