The federal government has finalized a plan to loosen access to PLUS Loans, which are granted to parents of higher education students, making it easier for borrowers with less-than-stellar credit histories to obtain them. With the new rules, which are essentially the same that the Department of Education officially recommended in August, the DoE will only review the last two years of an applicant's history instead of the last five, and a threshold will be set annually for exempting unpaid debt from a credit evaluation.
The DoE calculated that about 370,000 applicants that would have had their applications rejected will now be able to obtain a PLUS Loan. This is a reversal of a 2011 rule that tightened access to these loans, resulting in a sharp uptick in rejection numbers. The administration says it is working to make higher education more easily accessible to many families who can't typically obtain a private loan, especially as tuition costs continue to rise.
"With these regulations we'll reach and better serve many more families and students," said Deputy Secretary of Education James H. Shelton III.
The DoE also said that it will begin publicly publishing PLUS Loan default rates by institution, showing the percentage of borrowers from each school that don't repay their loans. As this blog reported last month, the DoE already identified 21 higher education institutions, mostly small trade schools, that could lose access to federal loan programs because of high default rates.
Student loan management software is a useful tool for lenders and borrowers, because it accounts for changing federal regulations to create amortization schedules that will ensure on-time loan repayments.