BeautyLink - Volume 7, Issue 3 - (Page 18)
A Rewrite of History - PLUS Loan
Adverse Credit History, That Is
AND THEN THERE'S
THE US DEPARTMENT of Education (ED) recently modi-
fied the Federal Direct PLUS Loan adverse credit history
regulations. The change came after significant public
dissatisfaction arose over the PLUS Loan credit approval
process. The Federal Direct PLUS Loan final regulations
were published on October 23, 2014.
These final regulations were scheduled to be operational as of July 1, 2015. But, ED subsequently published
in a January 27 Electronic Announcment that the effective date of implementation of the regulations would be
March 29, 2015.
Adverse Credit History Described
The new regulations stipulate that a PLUS Loan applicant is considered to have an adverse credit history if
the applicant has one or more debts where the total
combined outstanding balance of those debts is greater
than $2,085, and they:
* Are 90 days or more delinquent, or
* Are in collection, or
* have been charged off during the two years preceding
the date of the applicant's credit report.
The above criteria are in addition to the historic prohibitions (bankruptcy, a tax lien, or a student loan default)
that also create an adverse credit history for PLUS.
Eligibility Determination after
Adverse Credit History
A PLUS Loan applicant who has an adverse credit history may still be determined to be PLUS-eligible in two
* If the applicant satisfactorily meets the extenuating
circumstances provision in the regulations, or
* If the applicant obtains an endorser.
ED also extended the duration for which the credit
check for a PLUS Loan applicant remains valid. As
a result of the new regulations, a credit check result
remains valid for 180 days.
This article is presented
for informational and
only and should not be
considered legal advice.
PLUS Loan Counseling
If an applicant with adverse credit is subsequently determined to be eligible, the borrower must complete PLUS
Loan counseling. This counseling is provided by ED. It
is not an option for the school to provide the counseling.
It must be accomplished via ED's StudentLoans.gov
site. Applicants must complete the PLUS counseling
in one sitting.
PLUS Loan counseling is not the same as student
loan entrance counseling. If a borrower is otherwise
required to complete entrance counseling and also
will obtain a PLUS Loan after an initial adverse credit
history determination, the applicant must complete the
required PLUS counseling in addition to the student
loan entrance counseling. PLUS counseling must be
completed prior to disbursement of PLUS Loan funds.
Any applicant may complete this counseling. It is not
limited to PLUS borrowers who had adverse credit history determinations. Note that PLUS Loan counseling is
applicable for the duration of the credit check validity.
Therefore, in some cases, a borrower may have to repeat
PLUS Loan counseling.
Implementing the New Regulations
Schools must ensure all information related to the PLUS
Loan application process is updated to incorporate the
new rules. Updates should be made in any communication formats the school currently uses, whether in print
Beyond the information dissemination that is necessary for PLUS applicants, schools should also educate
staff about the changes. The Common Origination and
Disbursement (COD) system has new indicators on the
records that confirm all credit-related requirements
have been met and that the loan may be disbursed.
COD now also provides new responses and reports.
These enable schools to know applicants' status regarding the original credit decision, the decision expiration
date, those who met the credit requirements within the
past 30 days, etc. This information is beneficial as staff
work with students and PLUS applicants.
Schools should determine which policies and procedures they need to modify or create.
* How will the school notify applicants of the status of
their PLUS request?
* How will the school monitor and act on the results
of credit checks?
* Does the school have a plan for explaining the need
for PLUS counseling and tracking appropriate applicants' completion?
* Will the school notify prior 2014-2015 PLUS applicants
of the possibility of reconsideration based upon the
new criteria if they had prior adverse credit determinations, and the student is still enrolled in the summer
As the new PLUS regulations have recently become
effective, financial aid administrators will undoubtedly
find opportunities to assist more individuals through the
PLUS Loan process. It is important to be knowledgeable
and prepared for these new regulations as you work to
help applicants' with adverse credit histories have a
chance to rewrite their future history.
Sherwin Hibbets is director of Regulatory Affairs for
The courses FA230 - Financial Aid Management - Compliance without Compromise and FA110 -
Developing an Efficient Financial Aid Office are available on the AACS Online Training Center. Members
call AACS at 800-831-1086 for your VIP Discount Code. Visit the following URL to learn more about these
courses: www.aacstraining.org/courses/FA230 and www.aacstraining.org/courses/FA110.
| B E AU TYLINK | N A ILI NG IT! | 2015
Table of Contents for the Digital Edition of BeautyLink - Volume 7, Issue 3
Message From the Aacs President and CEA Chair
CEA Annual Convention & Expo Preview
Event Recap: 2015 Spring Executive Retreat & Financial Aid Workshop
AACS’ New State Relations Program Advisor
And Than There's Compliance
Fall’s Top Nail Trends
Beauty Schools Aim to Bring New Life to Nail Tech Programs
A Student's Perspective
Beauty Changes Lives
People & Places
New Products and Services
Associate Member Profiles: Nail Specialty Companies
New School Members
Upcoming 2015 Events
Index to Advertisers
BeautyLink - Volume 7, Issue 3