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#HBCUs Lose Millions: Bill Dropped Bill to Reverse Parent PLUS Loan Change

#HBCUs Lose Millions: Bill Dropped Bill to Reverse Parent PLUS Loan Change

HBCU Loss: “The worst situation I’ve Seen in 35 Years.” After many colleges, but particularly historically Black colleges and universities (HBCUs), lost millions after the Obama Administration changed loan requirements for Parent PLUS loans in 2011, members of the Black Caucus had a series of meetings with members of the Administration, stakeholders on the issue and the Education Secretary Arne Duncan.  What happened next? Nothing.

By late 2013 many HBCU advocates asserted that HBCUs had lost at least $168 million and that at least 14,000 students had been effected by the Parent PLUS loan change.

Longtime Hampton University President Dr. William Harvey said, This is the worst situation I’ve seen in my 35 years as President. Dr. Harvey is the Chair of President Obama’s Board of Advisors on Historically Black Colleges and Universities.

Almost exactly a year ago, Dr. Harvey said, this is a crisis until we receive the permanent fix.

Though Secretary of Education Arne Duncan apologized in September 2013 for the way the change was communicated, the change was never reversed.

“I am not satisfied with the way we handled the updating and changes to the PLUS loan program,” Duncan told a group of historically black college leaders.  “Communication internally and externally was poor. I apologize for that, and for the real impact it has had,” Duncan said.

parent-plusToday, two members of Congress who have Xavier, Grambling, Dillard, Southern, Bethune Cookman and Florida A&M in their states have offered a bill to reverse the Parent PLUS loan change.

“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, said Rep. Corrine Brown of Florida.

“There must be a fair standard when determining eligibility for this program, one that reflects the tough financial challenges of the past decade,” said Rep. Cedric Richmond of Louisiana.

The entire press release on the issue, issued today, is below:

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CBC Members Introduce Bill to Reverse ED Change to Parent PLUS Loan Program

WASHINGTON, DC — 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) have an extremely low default rate averaging around 7 percent, and graduates with Parent PLUS Loans have a 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.