WASHINGTON, DC (Link) – Today, Congressional Black Caucus (CBC) Members, Rep. Corrine Brown (FL-05) and Rep. Cedric Richmond (LA-02) introduced the Protecting Educational Loans for Underserved Students Act (the PLUS Act), a bill that will restore core credit standards used by the Department of Education(ED) prior to the change to the definition of “adverse credit” made in 2011.

The bill will also provide additional criteria for determining whether a parent has an “adverse credit history” and includes a new loan counseling provision to help ensure that parents who receive PLUS Loans fully understand the terms and conditions of the loans and their repayment obligations.

CBC Chair Marcia L. Fudge (OH-11): “I have been appalled and disappointed at the lack of willingness by the Department of Education to reverse a change that was made with no regard to the actual impact it would have on this nation’s students, and particularly on students at HBCUs. The reasons we’ve been offered as to why changes to the rule must stand have been unsatisfactory, especially because President Obama’s FY 2015 budget states that parents who are approved for Parent PLUS Loans (PPL) havean extremely low default rate, averaging around 7 percent, and graduateswith Parent PLUS Loans havea default rate around 5 percent.  The Administration has refused to fix a problem that it created for thousands of students, so Congress must attempt to fix it for them. I applaud Rep. Corrine Brown and Rep. Cedric Richmond for their efforts and for introducing this bill.”

Rep. Corrine Brown (FL-05):“It is very difficult for me to understand the reason why, during one of the worst economic crises to hit our country since the Great Depression, the Department of Education decided to make their lending policies even worse than bank standards and the  financial industry as a whole.  On one hand we have a horrible economy with numerous African American families facing credit problems and foreclosure. On the other hand, the Department of Education has implemented regulations with penalties so harsh, that if your family is in foreclosure, late on a cell phone payment or has any other kind of minor financial infraction, college students - often times first generation - will be penalized.  Even though President Obama has said time and time again that he wants to increase the number of college graduates in our nation - particularly among minorities - he is punishing those who can least afford it.  For these reasons, I am extremely pleased that this legislation is being introduced.” 

Rep. Cedric Richmond (LA-02):  “Higher education is the most powerful tool for breaking the cycle of poverty in America. The federal Parent PLUS Loan program is pivotal because it gives students the opportunity to attend a top tier college or university they would otherwise be unable to afford. There must be a fair standard when determining eligibility for this program, one that reflects the tough financial challenges of the past decade. This legislation, which I have introduced along with my colleagues in the CBC, establishes this standard and provides a fair shot for all students to earn a quality education.”

Background:

On October 11, 2011, the Department of Education changed its interpretation of the definition of “adverse credit” for the purposes of determining eligibility for the federal Parent PLUS Loan (PPL) program, which parents and students may use to help pay college expenses. 

Under the new definition, any delinquencies older than 90 days could result in denial of a PPL. Delinquencies include charge offs, medical collections, and even issues as simple as late payment for mobile telephone bills.

As families all across America experienced financial challenges due to the worst recession since the 1930’s, more than 400,000 students in total, who attend all types of institutions, were initially impacted due to this change.  The PPL change has also disproportionately affected Historically Black Colleges and Universities (HBCUs). Roughly 28,000 HBCU students have been impacted, with some students forced to drop out of school mid-year.

This change to the PPL program was made without analysis from an impact study or input from educational stakeholders, and the Department of Education made no attempt to use the negotiated rulemaking process or any similar process to gauge the potential severity of its actions.

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