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August 20, 2013 1:34 PM What Happens When Parents Don’t Qualify for Student Loans? We Change the Rules.

By Daniel Luzer

Thanks to lobbying efforts by many colleges, the federal government has backed down on its plan to enact stricter regulations on Parent PLUS student loans. Does this help students? Probably not.

According to an Associated Press piece by Shaquille Brewster:

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.

“Help” is perhaps not quite the operative verb here, as these parents were being denied loans because they, well, are credit risks. And the loans have fairly high interest rates, among the highest in the federal student loan system.

That’s basically because Parent PLUS loans, which allow parents and graduate students to borrow “without needing to worry about collateral, need-based forms, or FAFSA preparation time,” have no borrowing limit at all.

PLUS loans are generally available to people with “good credit history,” but the definition of good changes. In 2011 the Department of Education instituted a new, more stringent, policy under which it considered “delinquencies older than 90 days in determining credit worthiness for the Parent PLUS loan program.”

As Fudge complained, however, the new policy has disproportionately and adversely impacted students across this nation; in particular, more than 28,000 HBCU [Historically Black Colleges and Universities] students. It is time to stop the bleeding.”

Well yes, but the fact that parents don’t qualify under the new policy should perhaps be taken as an indication that they can’t really afford to take out these loans.

The fact that colleges, especially historically black ones, are expecting parents to take out somewhat risky loans to educate their children is perhaps the bigger problem here.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer

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