Panel Nears Agreement on New Standards for PLUS Loans By Lee Gardner
The latest round of the U.S. Education Department’s negotiated rule-making process for consumer-protection issues began with a tentative agreement on Monday on proposed regulations of PLUS loans. The rest of the day found negotiators divided over proposals regarding state authorization of online education and college-affiliated debit cards, a day before they are supposed to vote on final proposals.
The department’s latest proposal on PLUS loans, which are available to graduate students and parents of dependent undergraduate students, was the subject of gentle debate during the morning hours. Under the department’s proposal, delinquent debt of $2,085 or less would not disqualify potential borrowers from the program.
That’s a substantial change from the existing rule, under which borrowers with any amount of debt in collection or "charged off" on their credit histories during the preceding five years could be disqualified. Those standards caused a rash of loan denials when they were introduced, in 2011, especially among the families of students who attend historically black colleges, prompting outrage as well as talk of a lawsuit against the department.
Much of the discussion on Monday centered on allowing the $2,085 debt exemption to be adjusted for inflation in the future, using the annual Consumer Price Index, or CPI. Some negotiators suggested that the CPI was too "volatile" for adjusting the exemption and that it would lead to many incremental annual changes. But Chuck Knepfle, the financial-aid director at Clemson University, said that tying the exemption to the CPI could bring up the debt exemption "a little at a time—that’s the purpose of indexing."
David H. Swinton, president of Benedict College, an HBCU, was one of several negotiators who suggested using an average of a few years of the CPI to "smooth out volatility."
The department rejected any specific solution for adjusting the debt exemption, but its negotiator, Pam Moran, suggested that language be inserted into the rule that would allow the exemption to "be adjusted over time" as determined by the secretary of education.
Negotiators agreed to support that solution, and the proposed rule will come up for a final vote alongside the other issues under consideration on Tuesday, which is scheduled to be the last day of negotiations over "program integrity and improvement" rules.
Mr. Swinton, of Benedict College, said that the revised PLUS-loan rule was "as good as we can get" and that "the department did a pretty good job of satisfying the concerns" of the various constituencies represented at the table.
There was less harmony at the table regarding a proposed new "state authorization" rule and regulations governing college-affiliated bank accounts and debit cards.
The state-authorization proposal would require institutions whose online programs enroll students living in other states to obtain approval to operate in each of those states. Programs could not receive federal student aid for students in states where they were not approved. Consumer advocates on the negotiating panel argued that such regulation was critical for the good of students and their access to quality programs online.
