Education Department makes changes to PLUS loans

Education Department makes changes to PLUS loan program that may help thousands of families

WASHINGTON (AP) -- The Obama administration, under pressure from black college presidents and lawmakers, has made changes to the PLUS loan program that may help thousands of families qualify for the college financial aid.

The Education Department says families that have recent but small-scale debt may now become eligible for PLUS loans through appeals. The change in the program was announced in a letter dated Tuesday to Rep. Marcia Fudge, D-Ohio, chairwoman of the Congressional Black Caucus. A copy of the letter was obtained Wednesday by The Associated Press.

Black lawmakers have been pressuring the administration, saying large numbers of previously eligible applicants have been denied aid under tighter credit rules. Parents and graduate students who use PLUS loans have no borrowing limit, but they face some of the highest interest rates in the federal student loan system.

In fall 2011, the Education Department began considering delinquencies older than 90 days in determining credit worthiness for the Parent PLUS loan program. Last week Fudge released a statement urging the department to immediately suspend a policy she maintained was damaging to historically black colleges and universities.

"Actions taken by the Department of Education have disproportionately and adversely impacted students across this nation; in particular, more than 28,000 HBCU students. It is time to stop the bleeding," she said.

Parents whose loan applications are denied may ask for reconsideration under the new policy.

The Education Department said students whose parents are denied PLUS loans automatically become eligible for an extra $4,000 in loans that are more flexible and carry lower interest rates.

In June, the department announced it would begin sending regular reports to affected parents and schools showing how applicants could have their credit check reconsidered. The letter addressed to Fudge says they also will send weekly reports to school presidents so they can monitor the results of loan reconsiderations.

According to the United Negro College Fund, 28,000 students attending historically black colleges and 400,000 students nationwide were initially denied PLUS loans after the change, with other analyses reporting higher numbers.

The Congressional Black Caucus told the AP that its members were reviewing the changes.