New America #PlusLoan Panel
Compiling the top ideas with help from Twitter!
What is the Parent Plus Loan?
The Parent Plus loan is an unsubsidized federal loan for
parents of dependent students that are attending college
PLUS loans help pay for education expenses up to the cost
of attendance minus all other financial assistance
A Plus Loan is originated and processed through
the federal Direct Loans Program
October 2011: Federal Parent Plus loan policy was adjusted internally to enforce a more stringent review of credit.
Traditionally, a Parent Plus loan could be denied for one of these two reasons:
• Within the past five years, the credit report shows a loan default, bankruptcy, tax lien and other similarly
detrimental record on the credit report
• Credit report demonstrates a debt that is currently 90 or more days delinquent
What changed in October of 2011 is how a 90 or more days delinquent would be determined based on credit report
Prior to October 2011, the Department did not consider an account in “Collections” status to be part of the 90 day
delinquency criteria for a Plus loan denial. Plus loans were able to be approved in circumstances where a debt
already went over 90 days delinquent, and were sold to a collections agency for repayment. As long as the
collections account was not being listed as 90 days delinquent, the Parent Plus loans could be approved.
After October 2011, the Department began denying Parent Plus loans for
applicants that had accounts in collections or charge offs as proof of a 90+ day
The logic of the decision: The applicant had to be delinquent for over 90 days to
be put into collections or charge-offs.
So while the overall standards for Parent Plus loan approvals / denials has not
changed, the way the 90-day delinquency requirement is being observed has.
The Effects of Policy Changes
The adjustment in the observation of what counted as a 90+ day delinquency did
• Parent Plus loan denials greatly increased
• Parents were unable to access funding to cover college costs
• Many of these parents were approved in prior years, but suddenly were not
• Students were unexpectedly left without a way to pay their bill, even those close to
This achieved an effect of "Pulling out the rug" from a parent that may have been
approved for Plus during prior years. This suddenly left them unable to be approved
to help the student actually complete the 4 or more years necessary to complete
The Effects of Policy Changes
Colleges lost revenues: Additionally, colleges that had derived a high amount of
revenue through Parent Plus suddenly faced shortfalls. Hardest hit schools
were HBCU and some For-Profit colleges.
An appeal process was instituted where if a parent borrower were denied for
the loan, they may be able to have that decision overturned. As a result, the
department began taking and consequently approving many of the appeals in a
This is a very sticky way to provide loans to families who may not be able to pay
the debt back.
Is this the way a Federal Parent Plus loan program should operate?
On January 8th, the New America foundation held a panel to
discuss the Plus Loan and how it could be changed….
Here are some of the top thoughts and tweets from the
• Do the benefits outweigh the costs? Does this near guarantee to college access outweigh the
cost of the debt incurred to support that guarantee?
• Is it a more important priority to guarantee more loans or to guarantee more grants from the
• Should future federal loan profits be reinvested into increased federal grants for education?
• What about reducing college costs rather than increasing loan availability?
• A full report from Rachel Fishman is available at New America Foundation
If you’d like to learn more…
Click here for more information
about the parent plus loan: