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Latest from FSA: Final Rule to Strengthen Federal Direct PLUS Loan Program

October 27, 2014

Recently, the Department of Education announced the publication of a final rule to strengthen the Federal Direct PLUS Loan Program. This rule will ultimately help more students and families pay for college by ensuring they have the tools and resources they need to make informed decisions about their educational and financial futures. The final regulations revise the definition of “adverse credit history” for PLUS loan applicants and employ a streamlined application process for borrowers to attain a PLUS loan. The Department is committed to making improvements that will provide families with clear, customized information about their loan responsibilities. They are developing a new loan counseling tool that will provide personalized information to assist PLUS borrowers. Additionally, the Department will collect and publish information about the performance of PLUS loans, including default rate information based on credit history characteristics of PLUS loan borrowers and individual institutional default rates.

The final rule will be published in the Federal Register on Thursday, October 23rd and changes will include:

  • Establishing a threshold debt amount of $2,085, indexed to inflation, below which a potential borrower is considered to not have an adverse credit history.
  • Defining terms such as debt “charged off” and “in collection” to more accurately determine whether an applicant has an adverse credit history.
  • Reducing the time period of a borrower’s credit history that is considered to determine adverse credit history from the last five years to the last two years for charge offs and collections.
  • Requiring that PLUS Loan applicants who, despite having adverse credit are able to receive a PLUS Loan based on either demonstrating extenuating circumstances or by obtaining an eligible endorser, participate in loan counseling.


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Megan Freese, Communications Intern

Megan Freese, Communications Intern

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