In 2012, 28,000 students at America’s Historically Black Colleges and Universities (HBCUs) were denied Parent PLUS Loans. Since the Obama Administration’s Department of Education changed the loan standards for Parent PLUS loans in October 2011, over 400,000 parents total at U.S. colleges and universities were denied loans.
After the Department of Education began to implement stricter requirements for PLUS loan applicants under 34 CFR§ 682.201 (c)(2), over 14.616, there was a a major spike in loan denials for students at historically Black colleges and universities in particular.
The 2011 change by the Department of Education came in the years after African Americans were disproportionately affected by the economic downturn. In late 2011, the Black unemployment rate hit a 28 year high of 16%.
In 2013, the United Negro College Fund estimated that the change caused HBCUs around the nation to lose over $160 million. Many HBCU advocates say the number is much higher. Over 80% of budgets for HBCUs come from financial aid.
In June 2014 the United Negro College Fund (UNCF) announced it would accept a $25 million loan for 3,000 merit based scholarships for students from the Koch Brothers. The loan from the Koch Brothers offset the loss from the Parent PLUS loan crisis. In March 2014, the UNCF published a 20-page report called “The Parent Plus Loan Crisis: An Urgent Crisis Facing Students at the Nation’s HBCUs.”
Today the Department of Education is announcing Parent PLUS changes that will likely take effect in 2015. Though a Department of Education’s release states that the “current adverse credit history regulations have not been updated since the Direct lending program was established in 1994,” there was in fact a change in 2011. A change that Secretary of Education Arne Duncan would later apologize for in September 2013.
In April of 2014, Reps. Corrine Brown (D-FL) and Cedric Richmond (D-LA) offered legislation called the Protecting Educational Loans for Underserved Students Act (the PLUS Act), that would change the Parent PLUS “adverse credit” language back to what it was before the Obama Administration’s language change in 2011.
In a blistering press release the day the the legislation was introduced, Congressional Black Caucus Chair Marcia Fudge said, “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.”
In April 2013, President Obama’s HBCU Board Chair, Hampton University President Dr. William Harvey, called the Parent PLUS loan situation the worst problem he’d seen facing HBCUs in over three decades. Dr. Harvey made his strongly worded remarks during a speech at the annual National Association for Equal Opportunity (NAFEO) conference in Washington, D.C.
“This is the worst situation I’ve seen in my 35 years as President [of Hampton Univ.],” said Dr. William Harvey in, who has been the President of Hampton University in Virginia since 1978. Dr. Harvey is the Chair of President Obama’s Board of Advisors on Historically Black Colleges and Universities. Dr. Harvey announced that HBCUs lost $300 million after the rule change.
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In a meeting in the office of Congressman Danny Davis in June 2014 with members of the Congressional Black Caucus, Department of Education officials informed members that nine HBCUs were in trouble regarding loan defaults.
After the meeting, Rep. Davis said, “there didn’t seem to be any concrete answers in terms of resolution of the problem but there did seem to be direction in terms of things that can be followed through on that might net some results,” Rep. Davis said.
Secretary Duncan apologized for the Parent PLUS loan situation in September 2013.
“I am not satisfied with the way we handled the updating and changes to the PLUS loan program,” Secretary Duncan told a group of HBCU advocates and leaders at the Department of Education’s annual HBCU Week conference last year as reported by InsideHigherEd.com.
“Communication internally and externally was poor. I apologize for that, and for the real impact it has had, ” Duncan added.
Today in a statement on the Parent PLUS changes for 2015, Duncan said, “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. These changes allow us to continue to be good stewards of taxpayer dollars and open the doors of college to ensure all students have the opportunity to walk through them.”
Last month in a meeting with reporters, Deputy Education Secretary Jim Shelton, a graduate of Morehouse College, said that, “since the change, we’ve been working directly with the schools to try and re-enroll as many students as possible. Our data basically says that, even in those first cohorts, we were able to get 76 percent of students enrolled into the colleges that they applied to originally. Additionally, we just finished the rule-making process that allows us to adjust the flexibility around the PLUS loan program and that will come out more formally in the fall.”
If the changes to PLUS loans take effect in 2015 it will mean that HBCUs will have been dealing with the Parent PLUS Loan problem for five years. The Education Department’s full statement is below.
August 7, 2014
The U.S. Department of Education Strengthens Federal Direct PLUS Loan Program
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 today new regulations that will update eligibility standards and improve access for student and parent borrowers under the federal Direct PLUS loan program. The current adverse credit history regulations have not been updated since the Direct lending program was established in 1994.
“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. “These changes allow us to continue to be good stewards of taxpayer dollars and open the doors of college to ensure all students have the opportunity to walk through them.”
Formally published tomorrow in the Federal Register, the proposed regulations will allow more families to borrow under the PLUS lending program. While developing the updated standards, the Department gathered feedback and recommendations from students, families and partner organizations, including representatives of minority-serving institutions and Historically black colleges and universities (HBCUs). 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. Other proposed changes include:
· Clearly stating the adverse credit history eligibility standards for potential borrowers;
·Defining terms such as “charged off” and “in collection” to more accurately determine if an applicant has an adverse credit history;
· 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.
· Authorizing the Secretary to adjust the combined outstanding balance adverse debt threshold of $2,085 as necessary;
· Allowing denied PLUS loan applicants the opportunity to provide documentation that can be used for the Department’s reconsideration and require PLUS loan counseling for applicants who are granted loans under extenuating circumstances prior to loan disbursement.
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. In the meantime, borrowers who are denied for a PLUS loan under the current rules can continue to apply for reconsideration. The Department is also considering implementing final regulations before the 2015-16 school year begins so that borrowers could benefit even sooner.
The Department of Education’s Office of Federal Student Aid manages and administers the student financial assistance programs authorized by the Higher Education Act of 1965.